Connect Airways, the consortium formed in December 2018 comprised of Virgin Atlantic (30%), Stobart Aviation (30%) and investment firm, Cyrus Capital Partners (40%), has updated its offer for the main trading company Flybe Limited and flybe.com to £2.8 million. The consortium has also offered a revised bridge loan of up £20 million, after the troubled UK airline failed to meet the conditions of the original offer, with £10 million being made available immediately to allow the business to continue trading.
The consortium will still acquire all of the shares of Flybe Holding company at a later date for the purchase price agreed on January 11 of 1p a share. Immediately prior to completion of the acquisition, Connect Airways will acquire Stobart Air, Stobart Group’s regional airline and aircraft leasing business. Following the completion of the acquisition, the investors have pledged £80million in further funding to assist the transition of Flybe and Stobart Air into Connect Airways, which will have an enhanced presence at London Heathrow and Manchester airports.
Christine Ourmières-Widener, CEO of Flybe, blamed higher fuel costs, currency fluctuations and significant uncertainties presented by Brexit for the rapid demise of the regional UK airline. “We have been affected by all of these factors which have put pressure on short-term financial performance. At the same time, Flybe suffered from a number of legacy issues that are being addressed but are still adversely affecting cashflows,” she said in a letter to shareholders on January 14, 2019. “By combining to form a larger, stronger, group, we will be better placed to withstand these pressures.”
Warwick Brady, CEO of Stobart Group, described the planned combined entity as “powerful combination with sufficient scale to compete effectively in the UK and European airline markets”.
For Virgin Atlantic, which closed its own regional until, Red in 2012, said that the partnership would “provide excellent connectivity” to its extensive long-haul network and that of its joint venture partner, Delta Air Lines, at London Heathrow Airport and Manchester Airport”.
Meanwhile, on January 14 former chief executive of the Stobart group, Andrew Tinkler, who is in the middle of litigation with Stobart, was revealed to have brought 12% of Flybe, which he claims is “an investment decision” and not related to the court case with his former employer.
Flybe finalised the sale of its Gatwick Airport slots to Vueling for £4.5 million. Flybe specified that it had reached “a number of improved agreements with banks”. He also stated that “The board of Flybe believes that obtaining this revised facility from the consortium provides the security that the business needs to continue to trade successfully.”
Flybe shares will transition to a standard listing on January 17, 2019, and the broader acquisition is expected to be finalised on February 22, 2019.
Barclays is acting as financial adviser to Stobart Group and Connect Airways in respect of the acquisition. Morgan, Lewis & Bockius UK is acting as legal adviser to Connect
Airways and Cyrus. Hill Dickinson is acting as legal adviser to Connect Airways and Stobart Aviation. Rothschild is advising Virgin Atlantic, with legal advice provided by Herbert Smith Freehills. Evercore is acting as financial adviser to Flybe, with legal advice provided by Bryan Cave Leighton Paisner.