EasyJet rejects takeover bid and announces £1.2bn rights issue

Shares in budget airline easyJet tumbled today after it said it had rejected a rival’s takeover bid and would be raising cash from shareholders and taking on more debt. Saloni Sardana reports.

The board of British budget airline easyJet unanimously rejected a takeover bid by a rival on Thursday on grounds the offer “undervalued the business”.

Johan Lundgren, the company’s chief executive, confirmed nothing, but the unsolicited approach is said to be from Hungarian airline Wizz Air, reports the Financial Times

EasyJet said it is no longer considering any offer.

The news sent easyJet’s shares into freefall on Thursday. At the time of writing the share price is down 11% at £702.

Why did easyJet’s shares fall so much?

Investors appear to have placed greater emphasis on other news, in which easyJet said it was looking to raise around $1.2bn from shareholders through a rights issue in an effort to bolster its recovery.

Easyjet said it wanted to use the rights issue to boost its balance sheet and benefit from any growth opportunities that “strengthen easyJet's long-term positioning in the European aviation sector”.

The airline also said it had secured new bank financing commitments “which will further strengthen the company's liquidity position”. This involves a $400m new four-year senior secured revolving credit facility.

It made it clear that it may take further action and will “continue to review its liquidity position on a regular basis and will continue to assess further funding opportunities, should the need arise.”

With the aviation sector one of the hardest hit by the Covid pandemic, easyJet took a number of measures to survive, including cutting 4,500 jobs, raising cash from shareholders, and selling aircraft.

Lundgren said: "The capital raise announced today not only strengthens our balance sheet... but will also position us for growth so that we can take advantage of the strategic investment opportunities expected to arise as the European aviation industry emerges from the pandemic.”

EasyJet expects to fly up to 60% of 2019’s first-quarter capacity next year; a stark reminder that the pandemic may weigh on airlines into next year.

Laura Hoy, equity analyst at Hargreaves Lansdown, cast doubt on whether the measures would help easyJet recover demand, as the Delta variant may cause people to hold off their travel plans. “While nationwide lockdowns may not resume in earnest, people are likely to start policing themselves this winter by avoiding risky travel and large crowds,” she adds.

Recommended

The simple way to invest in iconic classic cars
Advertisement Feature

The simple way to invest in iconic classic cars

Alternative and passion investing are areas that have seen considerable growth in recent years, but some asset classes have priced investors out. Now,…
25 Nov 2022
7 ways to reduce your inheritance tax bill
Inheritance tax

7 ways to reduce your inheritance tax bill

The inheritance tax threshold cap has been extended until 2028, which will result in higher tax bills for many - we look at how to keep you inheritanc…
25 Nov 2022
Best junior stocks and shares ISA platforms
Isas

Best junior stocks and shares ISA platforms

A junior stocks and shares ISA is a great way to save for your child tax-efficiently. But it can be confusing deciding which investment platform to ch…
25 Nov 2022
Best savings accounts – November 2022
Savings

Best savings accounts – November 2022

Interest rates on cash savings are making a comeback. We look at the best savings accounts on the market now
25 Nov 2022

Most Popular

Wood-burning stove vs central heating ‒ which is cheapest?
Personal finance

Wood-burning stove vs central heating ‒ which is cheapest?

Demand for wood-burning stoves has surged as households try to reduce their heating costs this winter. But how does a wood burner compare with central…
21 Nov 2022
Fan heater vs oil heater – which is cheaper?
Personal finance

Fan heater vs oil heater – which is cheaper?

Sales of portable heaters have soared, as households look to cut their energy costs. But which is better: a fan heater or an oil heater? We put them t…
21 Nov 2022
Santander launches new bank account – is it any good?
Bank accounts

Santander launches new bank account – is it any good?

Santander’s new accounts gives you up to £20 cashback a month and 4% interest rate on savings.
25 Nov 2022