easyJet PLC (LSE:EZJ) shares jumped 14% to 668.49p in early trading after Apollo agreed key terms on a possible £5.7 billion cash offer for the budget airline, trumping rival suitor Castlelake and winning the backing of the airline's board.
The US private equity giant is proposing £7.15 per share, above the £6.90 that easyJet agreed in principle with Castlelake on Sunday.
The easyJet board said it would be minded to recommend Apollo's proposal to shareholders and is no longer minded to recommend the Castlelake deal.
Apollo's price represents an 81% premium to easyJet's closing price of £3.94 on 28 May, the last business day before Castlelake's interest triggered an offer period.
It is also 22% above the highest level at which the shares have traded in the past four years.
Eligible shareholders would alternatively be able to roll their holdings into the private vehicle through which Apollo's funds would own the airline, though terms of this stub equity option are still being negotiated.
The proposal is expected to be funded through committed equity from Apollo funds and debt financing, with Barclays saying it is highly confident of arranging the latter.
Apollo's intervention caps a six-week battle for the budget carrier. Castlelake, the US aviation investor, first disclosed its interest on 29 May and made escalating offers of £5.60, £6.00, £6.25 and £6.50, all of which were rejected, before easyJet granted it limited access to commercial information.
Its fifth proposal, at £6.90, won an agreement in principle at the weekend, sending the shares up more than 10% to a 52-week high on Monday.
Castlelake then raised its offer to £6.90 in a formal proposal on 4 July, but Apollo's approach four days later has now displaced it.
Analysts had questioned whether a Castlelake deal could clear European ownership rules, which require airlines operating in the bloc to be majority-owned and controlled by EU nationals, prompting the firm to structure its bid with former easyJet executive Peter Bellew and industry veteran Mark Breen.
Apollo said it would take all necessary steps to satisfy merger control and EU foreign subsidies conditions, and gave a best endeavours commitment on other regulatory clearances.
The firm said it regards easyJet as one of the most attractive businesses in global aviation and backs management's strategy of upgauging the fleet, growing ancillary and loyalty revenues, and scaling the Holidays division.
It also intends to keep the brand licence agreement with easyGroup, the vehicle of founder Sir Stelios Haji-Ioannou, whose family remains the largest shareholder with a 15.3% stake.
There is no certainty a firm offer will be made, and Apollo has until 5pm on 7 August to bid formally or walk away.
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