Shares of UK-based easyJet, one of the market leaders among European no-frills airlines, dropped another 3.9% on Friday to close at 680.80 pence.
Last Thursday, the counter had slumped 10.2% and was the worst performer on the Stoxx 600 after it spurned a bid from a smaller competitor, Hungarian discount carrier Wizz Air Holdings.
easyJet instead announced plans to raise £1.2 billion in stock and debt.
Out of 24 analysts, 15 recommended ‘buy’ on EZJ shares, seven suggested ‘hold’, and two said ‘sell’. Their average target price was 829.57p, Bloomberg data showed.
The stock has lost about 13.7% over the past five trading days.
Will easyJet receive another takeover offer?
Without naming the suitor, the British company on Thursday said it received a preliminary offer that was conditional, all-stock and had a low premium.
However, easyJet’s board rejected the approach unanimously, and the offer had been withdrawn.
News reports last week identified Budapest-based Wizz as the mystery bidder for its larger rival.
Reuters noted that Wizz’s spurned bid highlighted the ‘very different management approach’ of the two companies.
For example, easyJet is a hybrid player and aims to undercut legacy airlines at established airports. On the other hand, Wizz avoids most hubs and focuses on paring back fares, such as by excluding other costs like baggage, thus adopting an ‘ultra-low-cost’ model, Reuters reported.
The deal would have created a much stronger challenger to market leader Ryanair, although some analysts believe it could also be a distraction at a time of rapid change in Europe’s aviation sector, Reuters added.
Aviation consultant John Strickland said the question now is whether Wizz will return with another effort to deliver the consolidation, which he thinks is ‘practically inevitable’.
Sanford Bernstein’s research team wrote that easyJet’s network and customer reach coupled with Wizz’s low-cost management style ‘would be a winning combination’, and ‘definitely be a major shake-up of the European space’.
Although a takeover may be potentially beneficial for profits, it ‘would probably be met with significant cultural reservations on the target’s side’, Sanford Bernstein added.
Why is easyJet raising funds again?
Having declined Wizz’s bid, easyJet on Thursday said it will pursue a £1.2 billion (US$1.7 billion) rights offering and raise US$400 million in debt, partly to finance its growth at airports.
The fresh capital will also provide a buffer through the slow winter season and position the carrier for a tentative rebound in leisure travel.
Its dilutive rights issue marks the second time it has asked for cash during the Covid-19 pandemic. easyJet’s top shareholder and founder Stelios Haji-Ioannou did not participate in the first share sale.
Bloomberg described easyJet’s decision to go it alone as a gamble for its leadership, which Haji-Ioannou has criticised over its management of plane purchases and the Covid-19 crisis.