The European Union is preparing a review of airline ownership rules to prevent foreign investors from taking effective control of companies, thereby safeguarding regional strategic autonomy, according to Reuters. Currently, EU rules require that 51% of ownership remains in the hands of European investors.
The move, which is expected to materialise next autumn, comes amid the battle between two American investment funds, Castlelake and Apollo, for the acquisition of EasyJet. The low-cost airline is headquartered in the United Kingdom, but relies on operating licences issued by the EU to operate its bases and routes within the bloc. After Brexit, the company set a limit of 49.5% for ownership by non-EU shareholders to comply with current legislation.
In early July, EasyJet backed a £5.7 billion offer made by Apollo Global Management, which surpassed a previous £5.5 billion offer from Castlelake, but did not explain how it plans to meet EU requirements for majority ownership, a key obstacle for any acquisition of a European airline by a non-EU company.
If the transaction were to go ahead, it could set an important precedent for European airlines, opening the door to acquisitions by private equity funds in a heavily regulated sector where mergers typically involve another airline, often with government backing.
The move has surprised analysts. According to Divacons, “one might think that Castlelake and Apollo had some suitable regulatory card up their sleeves, but all indications suggest it was a mistaken deduction. If such bidders have to twist Brussels' arm to move forward, the transaction lacks viability”.
Following Brussels' decision to tighten control over airline ownership, EasyJet's shares lost 11.79% of their value.
