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Flybe plummets on £2.8m takeover offer

The struggling airline has received an offer from a joint venture between Stobart Group, Virgin Atlantic and Cyprus Capital Partners
January 16, 2019

Flybe (FLYB) lost almost 93 per cent of its market value after a consortium of bidders made a £2.8m bid for the ailing airline, equivalent to just 1p a share. The offer has been made by Connect Airways – a newly formed joint venture between Stobart Group (STOB), Virgin Atlantic and US-based Cyprus Capital Partners via DLP Holdings. The bid represents a dramatic discount to the 16.4p at which Flybe’s shares had closed trading the day before the offer was announced. In November 2018, the UK airline put itself up for sale in the hope that a buyer could come to the rescue of its financial woes.

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If the deal completes Connect Airways will become a regional carrier for the UK and Ireland and operate under the Virgin Atlantic brand. Connect will buy Stobart’s aviation business for £40m through a combination of high-yield and junior debt. This division is made up of Everdeal, which provides long-term aircraft crew maintenance, insurance contracts and charter series contracts, along with Propius, an aircraft leasing business.

At its full-year results last year it reported net debt of £59.1m, or 63 per cent as a proportion of equity. Chief executive Christine Ourmières-Widener said that the airline’s finances were suffering due to industry-wide headwinds including higher fuel costs, currency fluctuations and significant uncertainties presented by Brexit, along with "a number of legacy issues" that have hurt the company’s cash flows. The three operators behind the joint venture will provide Flybe with a £20m bridging loan, of which £10m will be released immediately, to help it meet its immediate capital requirements, and a further £80m once the acquisition is complete.

Connect Airways will be owned 40 per cent by DLP Holdings, and 30 per cent each by Stobart Group and Virgin Atlantic. DLP Holdings has also taken a 4.65 per cent stake in Stobart Group after buying £24.7m-worth of shares at 150p each. Flybe has also sold its slots at London Gatwick airport to Spanish airline Vueling for £4.5m. Connect Airlines will fly from London Heathrow and Manchester airports.