UPDATE 4-EasyJet rejects Wizz bid and raises $1.7 bln to go it alone

* To raise $1.7 bln from shareholders in rights issue

* Rejects all-share offer, source says bidder was Wizz Air

* Says new funds will help buy new airport slots

* Shares down 10%, reflecting discount for planned issue
(Recasts, adds background)

By Sarah Young and Abhinav Ramnarayan

LONDON, Sept 9 (Reuters) - EasyJet has rejected a
takeover approach from Wizz Air that would have created a
low-cost airline to rival Ryanair, opting instead to raise $1.7
billion from shareholders and go it alone in an industry
battling to recover from the pandemic.

EasyJet declined to name its suitor, but a source familiar
with the matter told Reuters it was Wizz Air. Wizz also
declined to comment.

EasyJet said the all-share approach fundamentally
undervalued its business, and added the potential bidder had
since said it was no longer interested in a deal.

The approach was "highly conditional in its nature which
made it very uncertain in terms of the deliverability of it,"
easyJet Chief Executive Johan Lundgren told reporters, without
giving details.

EasyJet said the fundraising would strengthen its balance
sheet should the COVID-19 downturn continue and allow it to take
advantage of an expected recovery in Europe's aviation market
by, for example, expanding its presence at key airports by
buying more slots.

"I believe this is really a once in a lifetime opportunity,"
Lundgren said.

EasyJet, which during the pandemic sunk to its first ever
annual loss and cut 4,500 jobs, is aiming to steal market share
from legacy carriers like British Airways owner IAG and
Air France-KLM as they retract their short-haul
operations.

But it faces stiff competition from Ryanair, Europe's
largest budget airline, and rapidly expanding Wizz, both of
which have recovered faster than easyJet over the summer.

Wizz has a stronghold over eastern European destinations
like Poland and Romania, while easyJet is well-positioned in
countries including Britain, Italy, Switzerland, Germany and
France. Adding to their potential good fit, both also operate
all-Airbus fleets.

EasyJet has a market capitalisation of 3.33 billion pounds
($4.6 billion), while Wizz is worth 5.1 billion pounds.

"EasyJet has always been a strategic target for Jozsef
Varadi," said a senior industry source of the Wizz CEO.

Based on passenger data from last year, when fewer people
travelled during the pandemic, a combination of the pair would
still lag Ryanair by almost 20 million passengers.

Wizz's approach comes after its share price has outperformed
easyJet's during the pandemic.

Shares in Wizz had bounced back to pre-pandemic levels by
November 2020 and hit an all-time high of 5,595 pence in March.
EasyJet's stock, by contrast, had recovered 70% of its
pre-pandemic value by May 2021 before starting another decline.

RIGHTS ISSUE

Illustrating the ongoing travel slump, easyJet said that
over July-September it expected its capacity to be about 57% of
pre-pandemic levels. Ryanair flew around 75% of its normal
passenger numbers in August, and Wizz flew over 85% that month.

EasyJet said it was seeing slot opportunities at Paris Orly,
Amsterdam, Porto, Lisbon, Milan Linate and possibly at London
Gatwick and that new funds would help build its network.

The rights issue is the second time the airline has tapped
shareholders during the pandemic. It raised 419 million pounds
in June 2020. At that time, the group's biggest shareholder,
founder Stelios Haji-Ioannou, did not participate.

Shares in easyJet, which were trading around 1,550 pence
before the pandemic hit in early 2020, fell as much as 14% in
early deals to 680 pence, the lowest since January, reflecting
the big discount proposed for the rights issue.

They regained some ground to trade down 10% at 713 pence at
0938 GMT, while Wizz was down 3%.

Under the rights issue, shareholders would be able to buy 31
new shares for every 47 existing ones for 410 pence each, a
35.8% discount on the theoretical ex-rights price of 638 pence
per share on Sept. 8, easyJet said.

The issue is underwritten by BNP Paribas, Credit Suisse,
Goldman Sachs, Santander and Societe Generale.

EasyJet also announced a new committed $400 million secured
revolving credit facility.

($1 = 0.7264 pounds)
(Additional reporting by Paul Sandle
Editing by Kate Holton and Mark Potter)