EasyJet has revealed that it rejected an unsolicited takeover approach while again moving to shore up its finances as it looks to recover from coronavirus disruption.

The low-cost airline did not reveal the name of the potential bidder but said the all-share approach fundamentally undervalued the business and that the entity had since walked away.

EasyJet said it would use a 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 from the pandemic over the coming years.

It said the fully-underwritten offer would enable shareholders to buy 31 new shares for every 47 existing shares at a discounted price of 410 pence each.

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The company said the move would raise £1.2bn and would be complemented by a new $400m (£290m) secured revolving credit facility.

Shares plunged by 10%.

Chief executive Johan Lundgren, who has been critical of the government’s approach to the relaxation of international travel, 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.

They included 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.

Neil Wilson, chief market analyst at Markets.com, said of the share price plunge: “The fact that a leading and – going into the pandemic – well-capitalised airline is, some 18 months or so on from the start of the crisis, still needing to raise fresh capital is a sign of the ongoing trouble in the sector.

“Demand remains the central problem: in Q4 2021 easyJet expects to be flying 57% of 2019 capacity, and up to 60% in Q1 2022.”

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