EasyJet Spurns Offer From Rival Wizz Air
(Bloomberg) -- EasyJet Plc rejected a takeover approach from Wizz Air Holdings Plc, according to people familiar with the plan, as its Hungarian discount rival sought to take advantage of a recovery in European flights.
The preliminary offer was conditional, all-stock and had a low premium, EasyJet said Thursday without naming the bidder. The U.K. carrier said the approach was rejected unanimously by its board and has been withdrawn.
Shares of EasyJet fell as much as 14% as the company said it will instead raise $2 billion in stock and debt. The funding will provide a buffer to get through the slow winter season and position the carrier for a tentative rebound in leisure travel. Representatives for Wizz Air and EasyJet declined to comment on the offer.
The decision to go it alone is a gamble for EasyJet’s leadership, which has come under fire from top shareholder and founder Stelios Haji-Ioannou over its management of plane purchases and the coronavirus crisis. European airlines are ripe for consolidation, with fresh outbreaks continuing to impede a return to travel and forcing carriers to raise more funding to stay afloat.
Haji-Ioannou would be willing to entertain a sale of his 25% stake in EasyJet should a transaction offer full value for the Luton, England-based airline, according a person with knowledge of the entrepreneur’s position.
“EasyJet’s network and customer reach combined with Wizz’s low-cost management style would be a winning combination,” Daniel Roeska, an analyst at Sanford C. Bernstein, said in an investor note. “It would definitely be a major shake-up of the European space.”
While potentially beneficial for profits, a takeover “would probably be met with significant cultural reservations on the target’s side,” Roeska said.
EasyJet shares dropped 10% to 710 pence as of 1:18 p.m. in London after the company said it will pursue a rights offering of 1.2 billion pounds ($1.65 billion) and raise $400 million in debt.
Wizz’s London-listed shares slipped 1.4% to 4,908 pence.
EasyJet had revenue almost three times that of Wizz before the pandemic. But it’s exposed to mature markets that limit its growth compared with the smaller airline, which has tapped Eastern Europe’s emerging middle class.
During the coronavirus crisis EasyJet has been held back by a slower reopening of U.K. travel amid constantly changing travel curbs, just as Wizz has benefited from a more rapid return to flying within the European Union.
The Budapest-based carrier said in July that it had accelerated jet deliveries from Airbus SE. Reuters reported on Thursday that Wizz is in talks to add at least 100 planes to its order. Airbus declined to comment.
EasyJet has a fleet of more than 300 narrow-body jets and is valued at about 3.2 billion pounds; Wizz has less than 150 planes but a market capitalization of 5 billion pounds.
Last year, Haji-Ioannou objected to an EasyJet share sale and didn’t participate, causing his stake to shrink. He has long criticized a deal to buy Airbus jets, and said he would only invest more if it was dropped.
Should he hold back from the current rights offer, Haji-Ioannou’s EasyJet holding would drop to a level at which he’d no longer be able to block certain resolutions.
Short-haul travel in Europe partly rebounded this summer, but the comeback has been spotty. EasyJet’s board nevertheless had “no hesitation” in rejecting the offer, Chief Executive Officer Johan Lundgren said on a conference call.
EasyJet said it expects to operate at 60% or less of pre-pandemic capacity through year-end. While it doesn’t expect a full recovery until 2023, the company sees opportunities to grow as legacy carriers restructure their short-haul operations.
Budapest-based Wizz, meanwhile, was back above 100% of its pre-pandemic capacity in August, and Ryanair Holdings Plc, the Dublin-based low-cost giant, plans to expand over the winter.
Wizz, run by CEO and founder Jozsef Varadi, is part of the constellation of low-cost airlines that count Bill Franke as their top investor. He chairs the company as well as Denver-based Frontier Group Holdings Inc., which went public earlier this year.
Wizz’s roots in Eastern Europe have given it a lower cost base than even Ryanair. That edge has helped the company expand west, establishing bases in Austria, Italy and the U.K. Its bid to add capacity at EasyJet’s main Gatwick hub has been held back by a lack of access to operating slots.
BNP Paribas SA, Credit Suisse Group AG and Goldman Sachs Group Inc. are global coordinators on EasyJet’s rights issue, according to the statement, with Banco Santander SA and Societe Generale SA acting as bookrunners. Greenhill & Co. is financial adviser to the airline.
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