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Easyjet rejects takeover bid, capital increase underway

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EasyJet announced Thursday that it had recently turned down an unsolicited takeover bid, as well as announcing a 1.2 billion pound ($1.6 billion) capital increase.

Additionally, the company has obtained a new revolving credit facility from banks for $400 million.

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Easyjet said in a statement that the preliminary offer had “fundamentally undervalued” the company, adding that the potential buyer has since confirmed that it has withdrawn its offer. According to Bloomberg, the unnamed buyer was Hungarian low-cost carrier Wizz Air.

The additional funding “will protect and strengthen Easyjet’s long-term positioning in European aviation,” including helping the group recover from the impact of the Covid-19 pandemic, the statement said.

In doing so, Easyjet hopes to “capitalize on the long-term strategic and investment opportunities that are expected to arise as the European aviation market recovers from the Covid-19 pandemic.”

Michael Hewson, chief market analyst at CMC Markets, said easyJet, like many other airlines, was struggling, but that passenger numbers 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.

Transport capacity still diminished
Beyond the capital increase, the company has also secured a long-term revolving credit facility from banks worth $400 million.

Despite the pandemic, the firm achieved a turnover of 212.9 million pounds for the three months that ended June, a significant increase year-on-year, and its pre-tax loss for the period decreased by 8%.

Although the company estimates its carrying capacity is still diminished, it will be at about 60% of its pre-pandemic level for the July-September period, its fourth lagged quarter.

Around 8:00 GMT, Easyjet’s stock was down 9.48% to 713.6 pence on the London Stock Exchange.

For MetaNews.

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Jonathan Hobbs

Jonathan Hobbs is an Australian investor and author that trades on a variety of asset classes, including currencies, equities, and commodities. Jonathan’s experience as a macro trader leverages his unique writing style to combine important elements, such as technical analysis and news. The other elements that he brings into his unique writing styles are foundation analysis aimed at rational equilibrium values, evaluating the sizes and motivations of buyers and sellers, as well as identifying the needs of the buyers and sellers in the individual markets. Jonathan is committed to quality writing for new traders as well as veterans.

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