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Webjet share price climbs 10% on takeover speculation

As takeover rumors create a frenzy among investors, we examine the source of these rumors as well as the response to them from Webjet itself.

Webjet takeover rumors in focus Source: Bloomberg

Buy the rumor, sell the news, the saying goes.

The Webjet share price surged today – following speculation that private equity or strategic firms may be considering a takeover of the $1.58bn business.

By the late afternoon, the Webjet (ASX: WEB) share price had rallied as much as 10.2% – as the market seemingly disregarded a clarifying statement from the company pointing out that no such offers were on the table.

The media statement from the company was rather straightforward, first noting that Webjet’s central ‘objective is to create value for its shareholders and from time to time we consider acquisition interest in the business.'

The company further stressed that:

'Should a [takeover] proposal be received that was compelling and certain, the company would put it to shareholders. No such proposal exists at present.'

Webjet share price surges anyway

The official company line of course differed from the initial rumor that sparked today’s 10%+ share price run-up.

Specifically, at 21:00 AEDT last night, the Australian Financial Review (AFR), commenting on the potential of Webjet becoming a takeover target, wrote that:

‘Goldman Sachs’ strong M&A team in Melbourne has been leading the charge, putting a comprehensive pitch to players it reckons may have access to $2 billion or so and an appetite to take on what was until recently a small cap market darling.’

That AFR article did however qualify these claims, noting that:

‘What’s less clear is whether Goldman’s sounding is on behalf of the company – or if it is just investment bankers being bankers and trying to drum up business.’

According to Webjet’s media statement today, it looks as if this speculation may indeed just be investment bankers being bankers.

FY20 guidance in focus

Regardless of all this media noise, the company stressed that it 'continues to be focused on executing its growth strategy, as articulated at the recent AGM in November.'

Indeed, as part of this recent AGM, Webjet highlighted what appeared to be an impressive set of estimated FY20 growth figures.

Looking at the broad strokes of this, the company noted that in FY20, Webjet (ASX: WEB) expected earnings (EBITDA) to come in at the range of $157m to 167m – representing a 26% to 34% increase on the prior fiscal year.

Moreover, corporate costs are expected to rise by 5% to 10% during the 2020 fiscal year. The company also pointed out that it is 'on track to significantly reduce receivables over 180 days.'

The Webjet (ASX: WEB) share price currently trades significantly away from its 52-week high – sitting at $12.8 per share.

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