EasyJet has rejected a takeover bid and is instead calling on shareholders to raise additional funds of £1.2 billion to secure the airline’s growth and take advantage of ‘post-pandemic opportunities’.
EasyJet’s board confirmed it had recently received a takeover approach from an unnamed bidder which ‘fundamentally undervalued the company’.
“This was carefully evaluated and then unanimously rejected. The potential bidder has since confirmed that it is no longer considering an offer for the copmany,” the airline said.
EasyJet, which lost more than £2 billon during the pandemic, including suffering its first annual loss in its 25-year history in 2020, still only expects to fly about 60% of its 2019 schedule between July and September.
It said that the proceeds of the equity issue would be used to strengthen its balance sheet, invest in growth opportunities in its core western European markets and bolster its easyJet holidays business.
It expects easyJet holidays to be a key driver of incremental profitability and revenue growth, with a ‘clear roadmap to contributing annual profit before tax in excess of £100 million’.
Alongside the £1.2 billion rights issue, easyJet said it had secured a new $400 million (£290 million) revolving credit facility from its banks. This will have a tenor of four years with an additional two‐year extension option at lender consent, conditional on the completion of the rights issue.
In a trading update, easyJet said UK domestic capacity in August 2021 was at 105% of 2019 levels with a load factor of 82%, whist intra‐EU capacity was at 81% of 2019 levels with a load factor of 85%, demonstrating the strength of the group’s UK domestic and intra‐EU flying schedule.
EasyJet directors expect capacity in Q4 2021 to be approximately 57% of Q4 2019 levels, a ‘significant increase’ compared to Q3 2021, when easyJet flew 17% of Q3 2019 capacity.
During Q4 2021, the airline expects to increase capacity allocation and improve expected load factors on both UK domestic and intra‐EU flying, with UK domestic capacity already at pre‐pandemic levels.
EasyJet Chief Executive Johan Lundgren said: “The capital raise announced today not only strengthens our balance sheet enabling us to accelerate our post‐Covid 19 recovery plan 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.
“Since the onset of the pandemic, we have undertaken decisive and robust action to restructure our operations, addressed our cost base and secured our financial position, keeping our investment‐grade credit rating. We have worked hard to maintain our customer friendly brand and network and been rewarded with immediate growth in demand when travel restrictions have been lifted.
“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.”
Under the rights issue, shareholders will be able to buy 31 new shares for every 47 existing shares at a price of 410 pence each, a 35.8% discount on the theoretical ex-rights price of 638 pence per share on September 8, easyJet said.