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Contents

• TOGETHER WITH BARBRI* 🤝

• FEATURED REPORT 📰

• IN OTHER NEWS 🗞

• OPEN TABS 🌐

• STUFF THAT MIGHT HELP YOU 👌

TOGETHER WITH BARBRI* 🤝

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FEATURED REPORT 📰

✈️ How the Takeover Code let easyJet swap a £5.5 billion offer for a better one (after it was "agreed")

What’s going on here?

easyJet (the British budget airline) has agreed to a £5.7 billion takeover bid from Apollo (one of the world's biggest US private investment firms).

Days earlier, the board had agreed a £5.5 billion deal with Castlelake, a US private equity firm best known for financing aircraft – which easyJet's board abandoned for Apollo's higher offer.

Why did Apollo and Castlelake both want easyJet?

easyJet is Europe's second-largest airline. Castlelake and Apollo want to buy it because its shares have been getting cheaper, while its underlying business has stayed valuable. There are three main reasons for this.

⛽ A war in the Middle East has increased the costs of running an airline. War between the US and Iran has pushed jet fuel costs up by about 70% compared with this time last year. Fuel is one of an airline's biggest expenses, and ticket prices can't rise fast enough to cover it, so airlines’ profits are shrinking (this is an issue across the airline industry).

💷 UK-listed companies look cheap. On the stock market, British companies have been selling for about 30% less than similar American ones. To a US buyer, that looks like a bargain. The plan is typically this:

1. Buy all the shares so the company no longer trades on the stock market (called a “take-private”)

2. Spend a few years improving the business (without shareholders watching its every move)

3. Sell it for a profit

If you want to better understand this trend (plus why these big UK deals go to American law firms) we covered it here.

✈️ Even if the airline struggles, its assets are valuable. easyJet owns hundreds of planes, has a long queue of new jets on order at a time when they’re hard to get, and controls almost half the take-off and landing slots at Gatwick airport. One analyst estimates easyJet's assets, sold separately, would fetch more than either bidder is offering for the whole company.

Both bidders are making the same bet. They predict the war will pass, fuel will get cheaper, and easyJet will make good money again – and if that bet goes wrong, the planes and the slots are still worth a lot.

To understand how easyJet could "agree" a deal then drop it days later, you need to look at the rules for buying UK public companies.

What is the UK Takeover Code?

Buying a UK public company isn't like buying any other company. The moment a buyer starts seriously considering buying a UK public company, it is bound by a special rulebook called the Takeover Code (enforced by the Takeover Panel).

The Takeover Code exists for two main reasons.

⚖️ To make takeovers fair. A buyer usually has to offer more than the current share price – otherwise shareholders would just sell on the market instead.

That creates a problem. Anyone who secretly learns a takeover is coming could buy shares early and make an easy profit when the higher price is announced. So the Code says that once takeover talks are no longer secret, the news must be announced to everyone at the same time. It also says every shareholder must be offered the same deal – so there’s no better price for a handful of big investors.

👆️ This is why easyJet announced both deals before either one was final.

⏳ To stop companies being left in limbo. A takeover creates uncertainty – employees wonder about their jobs, customers delay buying, and share prices move based on every rumour. The Code forces the buyer to make a decision. If they publicly show interest, they must make a formal offer or walk away – and if they offer, they must prove they actually have the money.

How could easyJet switch to Apollo after "agreeing" a deal with Castlelake?

To make sure takeover news reaches everyone at once, the Takeover Code has several disclosure rules.

Now let's look at the easyJet announcements with those rules in mind.

The Castlelake announcement on 5 July and the Apollo announcement on 10 July (just five days later) were both Rule 2.4 announcements. They were published because the Takeover Code says the market must be told once takeover talks reach a certain stage.

Both announcements used almost exactly the same wording. They said easyJet had reached an “agreement in principle on the key financial terms”.

That sounds like the takeover had been agreed – but it hadn’t. Only the price was broadly agreed.

Think of buying a second-hand car. You offer £9,000 and the seller says yes – but nothing is signed, nobody has paid, and either of you could walk away. These announcements were just a rule forcing the seller to put a “price agreed” sign in the car window.

In fact, both announcements say right at the top – in capital letters – that there’s no certainty any offer will ever be made.

Nobody had committed to buying or selling anything. That’s why easyJet could “agree” to a deal with Apollo days after “agreeing” to a deal with Castlelake.

So how does a takeover deal actually become binding?

For Apollo’s agreement “in principle” to become binding, it has to go through five steps.

1️⃣ Apollo checks what it's buying. This is called due diligence – inspecting easyJet in detail to confirm the company is what it appears to be. This is a big part of what corporate law firms do. Teams of lawyers dig through contracts, plane ownership, debts and disputes, and report anything worrying back to the buyer.

2️⃣ The lawyers write the deal down. The lawyers draft the firm offer announcement itself, a co-operation agreement – where Apollo makes promises like taking "all necessary steps" to win the key regulators' approval – and the financing documents – proof, required by the Code, that Apollo has committed funding in place to pay for every share.

3️⃣ easyJet's board commits. Every director must back the deal, and directors who own easyJet shares must sign irrevocable undertakings – promises that can't be taken back – to vote their own shares in favour (directors often own shares personally – these promises confirm how they’ll vote those personal shares). Rule 2.10 requires these promises to be publicly disclosed.

4️⃣ Apollo makes the binding offer. This is the "firm offer" announcement under Rule 2.7, and it's the point of no return. Apollo's bank must publicly confirm the money is really there. Once the announcement is out, Apollo must go through with the offer.

5️⃣ The owners finally decide. Shareholders vote on the deal – likely through a scheme of arrangement under Part 26 of the Companies Act 2006. This is a court-supervised process where shareholders holding at least 75% of the shares voted (and a majority of the shareholders voting) must say yes – plus a judge must approve the process, once regulators have signed off too.

What firms are involved here?

Paul Weiss is advising Apollo, Clifford Chance is advising easyJet and Castlelake is advised by Slaughter and May, and Milbank.

How can you use this in your applications?

Here are some ways you can use the insights from this story in your law firm applications.

IN OTHER NEWS 🗞

💼 Eversheds Sutherland's profits per partner have jumped 14% to £1.6 million. Revenue also rose 8% to £827 million. Across the decade, the firm’s revenue has doubled. The firm credited its corporate finance practice as a major contributor to this growth.

📞 Virgin Media has been fined £28 million for making it hard for customers to cancel. Ofcom found that over a million callers had to repeat their cancellation request, alongside Virgin deliberately dropping calls and implementing excessive hold times. It's the regulator's largest ever fine for direct consumer harm.

📺 Sky has struck a £1.6 billion deal to buy ITV's broadcasting arm. The purchase covers ITV's free-to-air channels and the ITVX streaming platform, aiming to create a UK streaming business big enough to compete with Netflix and Amazon. ITV keeps its studios business (which makes shows like Love Island) and plans to return around £950 million to shareholders. Freshfields advised ITV, with HSF Kramer acting for Sky.

OPEN TABS 🌐

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STUFF THAT MIGHT HELP YOU 👌

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