EasyJet buys Go for GBP 374 million

EasyJet confirmed this morning that it has struck a £374 million deal to buy rival Go, to overtake Ryanair as the biggest no-frills airline in Europe.

The airline will pay for the takeover by raising £276.7m through a new rights issue, where it will offer new shares to existing shareholders at 265 pence a share.

EasyJet’s chairman Stelios Haji-Ioannou said: “This is one of the most exciting developments in easyJet’s history and offers the potential to create substantial value for our shareholders.”

The combined operation will move forward without Go’s chief executive Barbara Cassani. She welcomed the deal as a “tremendous compliment” to Go’s achievements since starting up 1998, but she will not be joining the new group in any capacity and will leave her job at Go when the takeover is completed.

The current chief executive of easyJet, Ray Webster, will head the new, combined company. Commenting on the deal, he said: “The European low-cost airline market has grown significantly in the last few years, providing us with many opportunities. Combining easyJet and Go will provide additional critical mass and enable us to move forward faster.

“Both airlines are built on common business models. These models encompass similar values, cultures and fleets and we intend to take the best people and working practices of both companies to create a low-cost airline with the scale and capabilities to capitalise on any opportunity in Europe.”

The Go logo and livery will be replaced by the easyJet brand.

In the year to 31 March 2002, Go flew 4.3 million passengers generating revenue of £233.7 million and profits before tax of £17.0 million.

News agency Annanova reports “Fares are likely to remain at the same level as over the past years,” according to Mr Haji-Ioannou, and that the integration of Go and easyJet’s operations will cost around £25 million, according to Ray Webster, easyJet’s chief executive.

Although Mr Webster could not disclose what savings would result from the deal, he said that from the third year after the combination onwards, “costs will be offset by benefits.”

“But this [deal] is not about cost savings,” said Mr Webster. “By putting these two networks together [we will] create a low-cost airline with the scale and capabilities to capitalise on any opportunity in Europe.”

Read our previous stories:
8-May-2002 EasyJet takes option to buy BA’s German airline
7-May-2002 No-frills consolidation is ‘inevitable’ says analyst
25-Apr-2002 Cassani named ‘Businesswoman of the Year’
19-Feb-2002 Report says BA was wrong to sell Go