Easyjet this morning said that it had rejected an unsolicited takeover bid as it announced a new £1.2bn rights issue.
Shares in the FTSE 250 firm were down 10.2 per cent by the time markets closed this evening.
The budget carrier said that the bid had took the “form of a low premium and highly conditional all-share transaction which… fundamentally undervalued the company”.
It said that since it had rejected the offer, the bidder had withdrawn its interest.
Chief executive Johan Lundgren refused to confirm reports that fellow budget flier Wizz Air had made the swoop for the carrier.
Speaking to media this morning, he said: “We’re not confirming anything.”
Wizz Air also declined to comment.
Those who choose to participate in the raise will be offered 31 shares for every 47 they own, at a 35.8 per cent discount to the expected market price following the issue.
The airline has also secured a new $400m credit facility.
The offer came as Easyjet took yet more steps to shore up its finances amid the sluggish recovery from the coronavirus pandemic.
It has already raised £5.5bn from a range of sources and taken steps to cut costs across its operation.
Although travel restrictions have been eased across the carrier’s network of short-haul European destinations, it is still anticipating flying just 57 per cent of capacity in the fourth quarter.
In the first period of next year it is targeting increasing this to 60 per cent of pre-pandemic capacity, Easyjet added.
It said that the new equity would “protect and strengthen easyJet’s long-term positioning in the European aviation sector”.
In addition to strengthening its balance sheet, Easyjet said it would use the proceeds from the raise for any opportunities for expansion that arise in the coming months.
“The group is positioned in many markets as the leading low-cost brand based on its unique combination of convenience and customer service”, it said.
“As the European aviation market recovers post-Covid-19, opportunities will arise at airports within these markets, many of which are slot constrained, as legacy airlines restructure short-haul operations and regulators impose remedies in response to state aid.”
It will also use the money to update its fleet with new, more environmentally friendly aircraft.
In a statement, 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.
“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.”
‘Hard winter’ ahead for Easyjet
Hargreaves Lansdown equity analyst Laura Hoy said that the announcement showed that the airline sector was still struggling despite the easing of travel restrictions.
“Easyjet’s asking shareholders to open their wallets to get the low-cost airline through year’s worth of unprecedented turbulence”, she said.
“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.
“The decision to raise new capital sent shares on a nosedive. Alongside forecasts for capacity of roughly 60 per cent over the next six months, it suggests Easyjethas a hard winter ahead.”
CMC Markets head of markets Michael Hewson said it would not be the last airline to seek more shareholder cash before the pandemic was over.
“The outlook for airlines continues to be challenging with any sort of back to normal unlikely to come much before Q2 next year”, he said.