Budget airline EasyJet (EZJ.L) lost as much as a tenth of its value on Thursday after it revealed it turned down a takeover bid.
The company said that it had recently received an unsolicited preliminary takeover approach, which was “carefully evaluated and then unanimously rejected”.
The unnamed potential bidder has since confirmed that it is no longer considering an offer, EasyJet said.
It also announced plans to raise £1.2bn from shareholders in an attempt to help the firm weather the pandemic after its first annual loss in 25 years in 2020.
The fully underwritten rights issue aims to “protect and strengthen” the company’s long-term positioning in the European aviation sector, and help it recover from the health crisis by “resilience to downside risks”.
EasyJet said shareholders will be able to buy 31 new shares for every 47 existing shares at a price of 410p each. This represents a 35.8% discount on the theoretical ex-rights price of 638p per share on Wednesday.
The carrier also intends to launch the rights issue in France, Germany, Italy and Spain.
"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,” Johan Lundgren, chief executive of EasyJet, said.
"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.”
In addition to the rights issue, EasyJet said it had also secured a new $400m revolving credit facility from its banks.
The 10% fall on Thursday meant that the company was leading the FTSE 250 laggards. In the six months to the end of March, easyJet made a loss before tax of £701m.
The company said UK domestic travel is already above 2019 levels, although it still expected to carry only 57% of 2019 passenger numbers during the last three months of this year.
“Unsurprisingly the shares haven’t reacted well to this announcement falling sharply as shareholders face having to fork out more extra cash,” Michael Hewson of CMC Markets said.
“In various attempts to shore up its finances over the last 18 months the airline has raised over £5.5bn already since the start of the pandemic. It has also gone down the route of selling and leasing back 43 of its aircraft to raise extra cash, though it appears to have decided not to double down in this direction for the time being.”
He added: “EasyJet may not be the last airline to look at raising extra capital in the weeks and months ahead, given the current environment.”
Watch: EasyJet boosts summer capacity as travel returns