easyJet has announced its anticipated rights issue today but in a less expected announcement the UK low-cost carrier has disclosed that it was recently the target of an unsolicited preliminary takeover approach (from Wizz Air, according to the FT). easyJet comments that the offer – which was described as a “low premium and highly conditional all-share transaction” – was “carefully evaluated and then unanimously rejected”. The potential bidder has since confirmed that it is no longer considering an offer for the company.
easyJet stressed that the rejection of the offer was not only due to the conditions attached but also because of the strategic opportunity presented by the rights offer. easyJet is seeking to raise £1.2bn by way of the fully underwritten rights issue and it has also agreed commitments for a new four‐year senior secured revolving credit facility of $400 million, which has a two-year extension option that is conditional on the success of the rights issue. The additional funds will enable the airline company to strengthen its balance sheet and capitalise on long‐term strategic and growth opportunities.
While the additional funds will provide insulation from another delay in the return to pre-pandemic air travel, easyJet stresses that the money will materially improve it ability to take advantage of long‐term strategic and investment opportunities expected to arise as the European aviation market emerges from the COVID‐19 pandemic – namely gaining market share in high value Western European markets as rivals exit or continue to struggle, and step up its ancillary product portfolio and easyJet Holidays to boost incremental revenues; as well as the now ubiquitous pledge to invest in sustainability with new generation aircraft. easyJet’s roadmap for its easyJetHolidays offering anticipated the unit contributing annual profit before tax in excess of £100 million.
easyJet states that it expects to grow to pre‐pandemic capacity by 2023, and achieve strong returns and resilience as the recovery builds, with the medium‐term goal of achieving mid‐teen EBITDAR margins and low to mid teen ROCE.
"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,” said Johan Lundgren, Chief Executive of easyJet. "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…
"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."
easyJet maintains that the company is on track to achieve approximately £500 million in savings in the financial year ending 30 September 2021, of which the Directors expect almost half will be “sustainable on an ongoing basis”, with cost actions for the financial year ending 30 September 2022 “already underway”, confirmed the airline.
In August 2021, UK domestic capacity was at 105% of 2019 levels with a load factor of 82%, while intra‐EU capacity was at 81% of 2019 levels with a load factors of 85%.
easyJet expects the group's capacity in Q4 2021 to be approximately 57% of Q4 2019 levels, which is a significant increase compared to Q3 2021, when easyJet flew 17% of Q3 2019 capacity.
During the fourth quarter 2021, easyJet says that it 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.
Looking ahead to Q1 2022, easyJet currently expects to fly up to 60% of Q1 2019 capacity with a continued focus on profitable flying.