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Highlights
- EasyJet Plc has received an unsolicited takeover bid from the unnamed bidder.
- EasyJet Plc board has rejected the potential bid being reported to be from Wizz Air Holdings Plc, citing low premium and highly conditional all-share transaction.
- The company is planning to raise around £1.2 billion through the right issue to strengthen the balance sheet.
EasyJet Plc (LON: EZJ), a London-based low-cost airlines group, has rejected an unsolicited takeover bid from the unnamed bidder. According to the market rumours, the bid was from the Hungarian ultra-low-cost carrier, Wizz Air Holdings Plc (LON: WIZZ), which is looking to aggressively expand its operations across Europe and considering a possible merger and acquisition to take advantage of the lower valuation of airlines companies due to pandemic.
Details about the potential bid were not shared by the company. Still, EasyJet Plc Board said the takeover proposal was of a low premium and highly conditional all-share transaction, which was carefully evaluated before being unanimously rejected by the board.
EasyJet Plc’s Financials
The company reported a rise in passenger traffic after lifting some travel restrictions. In the third quarter of 2021, the company operated around 24,682 flights and flew at 17% of Q3 2019 capacity. The company expects fourth-quarter capacity to be at 57% of Q4 2019 levels. Also, the company reported revenue at £212.9 million in the three months ended 30 June 2021. However, during the Covid-19 pandemic, the company lost more than £2 billion in revenue, including a first annual loss in the 25 years of operations.
Will the merger work?
As per the market experts, the merger of two low-cost airlines could have given the bigger European airlines a tough fight. Moreover, both airlines are operating in the European market but follow different strategies. EasyJet Plc currently has over 300 aircraft and valued at just over £3,200 million, while Wizz Air Plc has a fleet of 122 aircraft and is valued at over £5000 million.
Wizz Air, which has rapidly grown over the last decade, follows an ultra low-cost business model with low employment costs and successfully generates revenues. As a result, it is one of the few airlines with significant revenue recovery, with share price trading above the 2019 pre-pandemic levels. However, EasyJet Plc follows a different strategy focusing on winning market share from bigger airlines groups like British Airways and KLM. The merger of the two airlines could give EasyJet Plc expertise to operates at a lower cost and gain market share in the aviation sector.
Share price performance
After the news, EasyJet Plc stock price declined by over 10%. The stock currently trades at GBX 703, down by 0.73% on 10 September 2021 at 9:30 am GMT+1 with a market cap of £3,234 million. In last one, despite all the adversities, EasyJet Plc shares have given a return of over 20% to investors.
Bottomline
At present, the takeover bid has been rejected, but as per EasyJet Plc executive statement, the company do not rule out the possibility of merger or acquisitions in the future.
EasyJet Plc also plans to raise gross proceed of around £1.2 billion through the right issue. The net proceeds from the right issue will help strengthen the company’s balance sheet to pre-Covid-19 pandemic levels and will accelerate the recovery from the pandemic and protect it from downside risk.
The company also plans to take advantage of long-term strategic investment opportunities which may arise in the near future as the aviation market recovers from the pandemic hence delivering value to its shareholders.
