easyJet has rejected a takeover bid from Wizz Air and will instead raise over $2 billion from shareholders and creditors. The low-cost airline was approached by an unnamed bidder, believed to be Wizz Air, for “a low premium and highly conditional all-share transaction.” easyJet’s board promptly rejected the approach and a takeover is no longer on the table.
easyJet turns down takeover approach
easyJet has turned down a takeover approach from a bidder believed to be low-cost rival Wizz Air. easyJet’s board unanimously rejected the offer and confirmed the bidder is no longer considering an offer. Although the bidder has not been officially named, sources close to the matter name Wizz Air as the suitor.
easyJet said in a statement,
“The board recently received an unsolicited preliminary takeover approach. This was carefully evaluated and then unanimously rejected. The potential bidder has since confirmed that it is no longer considering an offer for the company.”
easyJet said that the all-share bid undervalued the airline, leading its board to reject the offer unanimously. According to easyJet, the preliminary bid was conditional, all-share and had a low premium.
Johan Lundgren, easyJet Chief Executive Officer, said,
“[The approach] was highly conditional in its nature which made it very uncertain in terms of the deliverability of it.”
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Raising $1.7 billion from shareholders
easyJet’s rejection of the takeover means the airline will need to go it alone while the aviation industry remains in crisis. To that end, easyJet plans to raise $1.7 billion in capital via a rights issue.
The rights issue is set at 410p per share, a 36% discount on easyJet’s closing share price on Wednesday. Shareholders will be offered 31 shares for every 47 they own.
In a statement, easyJet said,
“The Board has concluded that raising additional equity will protect easyJet’s long‐term positioning in the European aviation sector and support growth as new opportunities arise from the COVID‐19 pandemic. As a result, the Company is therefore launching a Rights Issue.”
This represents the second time easyJet has raised money from shareholders during the pandemic, after raising around $580 million in June 2020. Shares in easyJet fell by as much as 14% this morning and have lost around half their value over the past year.
Johan Lundgren said,
“This capital increase will allow us to build on our fundamental operational strengths and network strategy for our customers as well as accelerate long-term value creation for our shareholders.”
The airline also confirmed that it has “agreed commitments for a new four‐year senior secured revolving credit facility of $400 million.” This would take total capital raised to over $2 billion.
Slot opportunities from legacy carriers
easyJet has said the new capital would help the airline grow its network, with slot opportunities at Paris Orly, Amsterdam, Porto, Lisbon, Milan Linate and London Gatwick opening up due to legacy carriers restructuring short-haul operations.
“We believe within six to 12 months that there will be more slots that become available as part of the retrenchment of legacy airlines.”
easyJet has said it expects to fly around 57% of its pre-pandemic schedule from July to September and won’t exceed the 60% mark for the rest of the year. In contrast, Wizz Air exceeded pre-pandemic operations this summer and recently announced its ambitious plan to hire 4600 new pilots by 2030.
Do you think easyJet has made the right decision? Do you see the airline successfully growing its network in the next 6-12 months? Let us know your insights in the comments.