EasyJet's board of directors has reached an agreement in principle with US investment firm Castlelake over a potential takeover offer valued at approximately £5.2 billion. The proposed deal, which values EasyJet shares at £6.90 each, represents a significant development after the airline had previously rejected four lower offers from Castlelake.

The airline had accused Castlelake of attempting to acquire the company "on the cheap" with its earlier bids, which ranged from £6 to £6.50 per share. The latest proposal, put forward on July 4, has now secured the board's conditional backing.

While this agreement marks a crucial step, it does not guarantee the completion of a deal. Castlelake must now navigate regulatory approvals, including a significant hurdle related to EU ownership rules. As EasyJet is a European company, EU regulations stipulate that it must be at least 51% owned by a European entity. Castlelake, a US firm, has indicated it intends to comply with this requirement. The investment firm has until August 3 to either formalize its offer or withdraw its intention to bid.

EasyJet's board stated that the financial terms of the revised proposal are at a level they would "be minded to recommend" to EasyJet shareholders if a firm offer is eventually made. The airline's shares closed on Friday at £5.58, and had previously fallen by more than 30% in the past year, a decline EasyJet attributed partly to the impact of the conflict between the US and Iran on the travel sector.

Castleqake, which currently holds a small stake of about 2.14% in EasyJet through managed funds, manages assets worth $36 billion (£27.3 billion). In announcing the agreement in principle, Castlelake emphasized its "tremendous respect" for EasyJet and its employees, expressing an intention to support the airline's future growth and transformation into a more resilient European carrier.

EasyJet is one of Europe's major low-cost airlines, employing over 19,000 people and operating approximately 1,200 routes across 35 European countries. The potential takeover, if finalized, would require shareholder approval.

This development follows earlier rejections of takeover bids by EasyJet, with the company publicly stating its concerns about the valuation of its shares in previous statements. The airline had highlighted that its stock price was temporarily depressed, suggesting the proposed offers did not reflect the company's true value.

The finalization of this deal remains contingent on several factors, including successful regulatory reviews and securing necessary shareholder consent. The deadline for Castlelake to make a firm offer or withdraw its intentions adds a layer of anticipation to the ongoing negotiations.