British budget airline easyJet has agreed in principle to a sweetened ‌takeover bid from U.S. investment firm Castlelake that values the carrier at up to £5.5 billion ($7.34 billion), it said on Sunday, a potential shakeup for Europe's aviation sector.

The new offer at £6.90 a share represents a 73% premium to easyJet's closing price on May 29, when the private equity fund ​manager disclosed its interest in the airline to British regulators, driving the shares up steeply since then.

The deal, ​which would see the U.S. investor take 31-year-old easyJet private, coincides with operating challenges for airlines globally as they grapple with sharply higher ⁠fuel prices and profit pressure due to the Iran conflict.

EasyJet's stock has jumped since Castlelake's interest became public in late May. It has now agreed in principle to a 690p per share offer from the U.S. investment firm.

Locked in fierce competition with rival Ryanair, easyJet had long ​been viewed as a takeover target, with its valuable landing slots at airports including London Gatwick, Paris, and Geneva attractive ​to potential bidders.

EasyJet in June rejected a £4.93 billion proposal from Castlelake but signalled an interest in continuing talks by granting the private equity manager limited access to the airline's commercial data.

On Sunday easyJet's board said that the latest bid was at "a value that the Board would be ​minded to recommend to easyJet shareholders," though it added Castlelake now needed to submit its firm intention to make an offer ​by August 3.

Castlelake, which is a major lender to airlines and has leased airplanes to about 200 airlines, declined to comment beyond its ‌joint announcement ⁠of the deal with easyJet, citing regulatory restrictions.

DEAL FACES EU OWNERSHIP RULES CHALLENGE

Analysts had raised questions about whether Castlelake could meet European Union regulations requiring airlines operating in the bloc to be majority owned and controlled by EU nationals.

While the issue was not mentioned in Sunday's deal, Castlelake previously said it would own 49% of the bidding vehicle with the remainder held ​by two EU nationals, former ​Malaysia Airlines CEO Peter Bellew ⁠and senior industry executive Mark Breen. Bellew was easyJet's chief operating officer from 2019 to 2022.

EasyJet, which flies low-cost routes in 38 European countries, operates 355 aircraft across more than 1,200 ​routes and has struggled to recover since the COVID-19 pandemic. But its package holiday business ​and efficient Airbus ⁠fleet have been bright spots.

British Cypriot entrepreneur Stelios Haji‑Ioannou, who founded easyJet in 1995, left the board in 2010 but remains the biggest investor with a roughly 15% stake alongside his family. He has had a history of public conflict with management over ⁠growth plans.

The ​British market is on course to set a mergers and acquisitions record ​in 2026 as weaker valuations among London-listed companies attract buyers. EasyJet initially said Castlelake's approach was "highly opportunistic" as the Iran war turmoil depressed its shares.

Source: Reuters