A proposed £5.5 billion takeover of easyJet led by the US investment fund Castlelake faces ongoing challenges, particularly concerning European Union ownership regulations. The deal, which values easyJet’s shares at 690p each, has received a tentative endorsement from the airline’s board, contingent on the offer meeting EU rules that require airlines operating within the bloc to be majority-owned and controlled by European nationals.

This latest offer, backed by Canadian private equity firm Brookfield and Goldman Sachs, marks Castlelake’s fifth indication of interest, having increased its bid from an initial 560p to the current level in less than a month. EasyJet shares rose by 9.3 percent to 610p in response, though this remains over 13 percent lower than the offer price, reflecting investor skepticism about the deal’s viability.

Key among the concerns is Castlelake’s proposed solution to the EU ownership criteria. The fund has suggested creating a “concert party” structure headed by Peter Bellew, a former easyJet operations director, composed of European nationals who would hold majority control and provide roughly £2.8 billion for their part of the acquisition. However, details on how this group would be financed and governed remain unclear. European regulators are expected to scrutinize the arrangement closely to ensure it complies with ownership and control rules and is not merely a façade for non-European investors.

A City broker emphasized the lack of new information regarding Castlelake’s ownership structure, calling it “opaque” and warning that shareholder approval is uncertain. Mounting doubts persist amid a lack of endorsement from easyJet’s largest shareholder, Sir Stelios Haji-Ioannou, who holds a 15 percent stake. While Castlelake has reportedly offered him the opportunity to maintain a shareholding post-takeover, he has yet to publicly signal support, leaving his position as a potential deal breaker.

The easyJet board’s willingness to recommend the offer has surprised some analysts and investors, given the airline’s earlier forecasts of achieving £1 billion in annual profits through strategic shifts such as expanding into package holidays and optimizing scheduling. EasyJet’s management previously projected significant financial improvements driven by newer, more fuel-efficient aircraft and a recovery from substantial winter losses. The current offer price is roughly 5.5 times those projected earnings, suggesting management’s confidence in the profitability outlook may have diminished amid broader economic and geopolitical uncertainties.

The possibility of rival bids has also been raised. Market analysts note that easyJet’s position as a leading short-haul carrier makes it a potential target for European airline groups looking to consolidate, including Air France-KLM and International Airlines Group. The board’s apparent openness to offers above the current level might encourage other strategic investors to enter the fray.

In summary, while easyJet’s board has tentatively accepted Castlelake’s improved offer, the transaction remains subject to significant regulatory hurdles and shareholder approval. The outcome will likely hinge on the fund’s ability to satisfy EU ownership requirements and gain support from influential shareholders, including Sir Stelios Haji-Ioannou.