UK carrier easyJet spurns takeover bid from rival Wizz Air
The carrier said the approach was rejected unanimously by its board and has been withdrawn
easyJet rejected a takeover approach from Wizz Air Holdings, 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 on Thursday without naming the bidder. The UK carrier said the approach was rejected unanimously by its board and has been withdrawn.
easyJet shares fell as much as 14% as the company said it will instead raise $2bn 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 to 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 710p shortly after 1pm in London after the company said it will pursue a rights offering of £1.2bn and raise $400m in debt.
Wizz’s London-listed shares slipped 1.4% to 4,908p.
easyJet had revenue almost three times that of Wizz before the pandemic. But it is 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 UK travel amid constantly changing travel curbs, just as Wizz has benefited from a more rapid return to flying within the EU.
The Budapest-based carrier said in July that it had accelerated jet deliveries from Airbus. Reuters reported on Thursday that Wizz is in talks to add at least 100 planes to its order.
easyJet has a fleet of more than 300 narrow-body jets and is valued at about £3.2bn. Wizz has fewer than 150 planes but a market capitalisation of £5bn.
Last year, Haji-Ioannou objected to an easyJet share sale and did not participate, causing his stake to shrink. He has long criticised 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 would 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, CEO 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 does not 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 Holding, 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, 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 UK. Its bid to add capacity at easyJet’s main Gatwick hub has been held back by a lack of access to operating slots.
Bloomberg News. For more articles like this please visit Bloomberg.com.
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