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The board of budget airline easyJet has “unanimously rejected” a takeover approach and announced plans to raise £1.2 billion from shareholders.
The business said it had been the target of an unsolicited offer from an unnamed company, which would have seen easyJet investors swap their shares for shares in the bidder.
However the board said the bid “fundamentally undervalued” easyJet, adding that the proposal was highly conditional, compared with the certainty of raising cash from shareholders.
The board recently received an unsolicited preliminary takeover approach. This was carefully evaluated and then unanimously rejected
In a statement, easyJet said: “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 it plans to spend the £1.2 billion it hopes to raise on trying to recover from the devastating impact of Covid-19.
The money will give easyJet resilience should the pandemic continue to push down passenger numbers over the next year.
It will also improve the chances of delivering long-term value to shareholders.
While nation-wide lockdowns may not resume in earnest, people are likely to start policing themselves this winter by avoiding risky travel and large crowd
Laura Hoy, Hargreaves Lansdown
EasyJet added that the move will also help it “take advantage of long-term strategic and investment opportunities expected to arise as the European aviation market emerges from the Covid-19 pandemic”.
Hargreaves Lansdown analyst Laura Hoy said: “EasyJet’s asking shareholders to open their wallets to get the low-cost airline through a year’s worth of unprecedented turbulence.
“The pandemic’s expected to continue weighing on capacity in the year ahead as the Delta variant continues to spread.
“While nation-wide lockdowns may not resume in earnest, people are likely to start policing themselves this winter by avoiding risky travel and large crowds.”
EasyJet has already turned to shareholders during the pandemic. So far the company has raised £5.5 billion, as well as selling dozens of its planes and leasing them back.
CMC Markets chief market analyst Michael Hewson said that easyJet has, like many airlines, been struggling but that passenger figures were slowly improving.
“In May the airline said it had access to £2.9 billion of liquidity, however today in a sign that management want to be able to ride out what could be a difficult winter season, easyJet have announced that they are looking to raise another £1.2 billion from a fully underwritten rights issue, sending the shares sharply down and back to its January lows,” he said.
The share price fell by 9.4% on Thursday morning.