British low-cost airline easyJet accepted an improved takeover proposal from US private equity firm Apollo on Friday, triggering a bidding battle after the new £5.7 billion offer surpassed a rival proposal from Castlelake.

Apollo’s offer, valued at £5.7 billion (approximately $7.7 billion), exceeds Castlelake’s bid and marks the start of what analysts described as a bidding war for the airline, which operates primarily across European destinations.

In a statement, easyJet said it had reached an agreement in principle with Apollo following the firm’s unsolicited offer of £7.15 per share, which topped Castlelake’s £6.90 per share proposal.

The airline said the Apollo proposal delivers “a superior outcome” for shareholders, adding that “the easyJet board is no longer prepared to recommend Castlelake’s proposal,” the company said.

Before Apollo entered the process, easyJet had appeared set to be acquired by Castlelake after accepting the US investment firm’s fifth and improved offer, submitted the previous Sunday.

Castlelake manages approximately $38 billion in assets.

“A bidding war is under way,” said Neil Wilson, investment strategist at Saxo UK.

“Prime take-off and landing slots, growth in the higher-margin holidays business and an order book for new Airbus aircraft make the company highly attractive,” Wilson said.

“easyJet should be seeking more,” Wilson added, suggesting the airline may be worth more than either of the current offers.

Susannah Streeter, head of money and markets at Wealth Club, said easyJet’s rapidly expanding holidays division is likely to be one of the principal attractions for Apollo.

“Holiday packages generate higher margins and more predictable revenues than airline tickets alone, and Apollo is likely to believe there is considerable value that can be unlocked by expanding the business,” Streeter said.

Shares in easyJet surged 14.5 per cent to £6.73 during morning trading on the London Stock Exchange on Friday.

Despite the sharp rise, the share price remained below the per-share value of both takeover offers, indicating that investors may expect further bids.

Apollo, which manages more than $1 trillion in assets globally, is already an active investor in the aviation sector.

The US private equity firm has previously invested in Aeromexico, Sun Country Airlines and Atlas Air, while it has also provided financing to Air France-KLM and Virgin Atlantic.