Flybe's (FLYB) largest shareholder, Hosking Partners, is seeking to oust chairman Simon Laffin and have him replaced with Eric Kohn, an executive with past experience in the airline industry.
Hosking – which owns 19 per cent of outstanding shares – said it had “serious concerns regarding the decline in value of Flybe in recent months" and with the board's agreement to dispose of the group’s operating business to Connect Airways, “ostensibly as a distressed sale” and without shareholder approval. Connect is a newly formed joint venture between Stobart Group (STOB), Virgin Atlantic and US-based Cyprus Capital Partners via DLP Holdings.
In response to Hosking’s demands, Flybe stated that it continues to have “full confidence” in Mr Laffin and that the board has acted at all times in the interests of shareholders.
The group also said the documentation it had received from Hosking was not a valid request under section 303 of the Companies Act 2006 because such a request had to be made by a member of the company. Flybe said it had also informed Hosking that the resolution to direct the board to appoint Mr Kohn to conduct an investigation would be ineffective as the company’s Articles of Association do not confer on members the necessary powers.
Flybe shareholders voted to approve a transfer of the shares from a premium to a standard listing in December after management proposed the switch in November. The airline said that, given the decline in market capitalisation, the standard listing would make it easier to undertake a “programme of asset disposals and other financing measures” to restore its cash balances. The standard listing means shareholders do not get to vote on the divestment of the trading businesses to Connect Airways, but will still be entitled to vote on whether to accept the offer of 1p a share.
The Flybe board has also been accused by Hosking of improper handling of the formal sale process. Hosking believes the public documents suggest that bidders breached their confidentiality obligations by joining forces and that alternative bidders were excluded. Hosking is “determined” to have Mr Laffin removed from the board and replaced with Eric Kohn, currently chairman of Barons Financial Services, to establish how Flybe has moved from rejecting a 40p-a-share offer from Stobart Group in March last year, to recommending a 1p offer from Connect.
