UK airline easyJet rejects takeover offer, to raise $1.7 bln

British airline easyJet said it had rejected a takeover offer on Thursday and would raise $1.7 billion from shareholders to fund its pandemic recovery and expand operations.

The company said the all-share approach fundamentally undervalued the business. It said the potential bidder had since stated that it was no longer interested in a deal.

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EasyJet said it would use the rights issue to strengthen its balance sheet and also to take advantage of growth opportunities that arise from the expected recovery in Europe’s aviation market over the coming years.

It wants to steal market share from legacy carriers like British Airways-owner IAG, once a rumored suitor of easyJet, and Air France-KLM as they restructure their short-haul operations.

Chief Executive Johan Lundgren said the capital raise would enable the airline to accelerate its post-COVID-19 recovery plan and position it to take advantage of strategic investment opportunities, such as expanding its presence at key airports by buying more landing slots.

“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,” he said.

Under the rights issue, shareholders will be able to buy 31 new shares for every 47 existing shares at a price of 410 pence each, a 35.8 percent discount on the theoretical ex-rights price of 638 pence per share on Sept. 8, easyJet said.

The rights issue is underwritten by BNP Paribas, Credit Suisse, Goldman Sachs, Santander, and Societe Generale.

It also announced a new committed $400 million secured revolving credit facility.

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