The UK takeovers keep on coming. EasyJet is the latest recipient of a takeover bid, although the suitor has already been fought off.
“Details are thin apart from we know it was a listed business making the approach as it was structured as an all-share offer. While the airline sector in general is still looking vulnerable, the best times to pounce on a rival is when sentiment is weak towards an industry,” said AJ Bell’s Russ Mould.
“Wizz Air looks a possible candidate to have made the bid given it is incredibly ambitious and EasyJet would provide it with much greater coverage of Western Europe, having already established a strong position in Eastern Europe. It is financially stronger than many of its rivals and owning EasyJet could turbocharge its growth.
“A US airline might also be interested in EasyJet given how that would facilitate geographical expansion at the click of a finger.
“And then there is International Consolidated Airlines which has talked about a desire to launch a low-cost airline operation. Rather than going head-to-head with EasyJet, why not simply own it? The risk with International Consolidated Airlines is that it is already sitting on massive amounts of debt and its shares are in the doldrums, so would EasyJet shareholders really want to take IAG paper?
“Finally, one cannot rule out Jet2 which is slightly smaller in market value than EasyJet (£2.5 billion versus £3.3 billion respectively), but strategically a sound fit.
“The competition authorities might have something to say about any UK airline looking to buy EasyJet, but that is part and parcel of takeovers these days.
“EasyJet is going cap in hand to shareholders instead and asking for money to put it in a stronger financial position to weather the current storm and support growth plans. Whereas the days of issuing new equity to raise more cash to see them through the pandemic are long gone for many companies, the airline sector continues to ask for more.
“Speculation there could soon be more relaxed rules around travelling outside the UK would suggest EasyJet’s rights issue is well timed. Get more cash now and take advantage of any boom in bookings potentially from the end of this month.”