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Virgin, Stobart and Cyrus consortium takes off with rescue deal for Flybe
Posted on Friday, 11 January 2019 10:07
Virgin Atlantic, Stobart Group and Cyrus Capital Partners have teamed up to take over cash-strapped UK-based airline Flybe for about GBP 2.20 million.
The offer of 1.00 pence for every item of stock held represents a 94.0 per cent discount to the group’s close of 16.38 pence yesterday.
Shares dropped significantly after Flybe issued a profit warning in October that it would lose GBP 22.00 million due to poor demand, a weaker pound and higher fuel costs.
The airline had a stock price of more than 30.00 pence prior to the cautioning and began reviewing options, including a sale, in November.
Shortly after this Virgin expressed interest in acquiring Flybe, sources told Sky News at the time, adding it would be in competition with Stobart, which was also said to be making an offer.
However, the latter ended up in a row with the carrier’s former chief executive, among other members of the board, which resulted in the matter being taken to court.
The issue must have been resolved, with Sky News reporting yesterday that Virgin and Stobart have agreed to team up for the business and have brought in Cyrus to take part in the acquisition.
Together, the consortium has formed a new entity to be known as Connect Airways and plan to lend an initial GBP 20.00 million to Flybe to support ongoing operations.
Following completion of the acquisition, an additional GBP 80.00 million will be provided in further funding to invest in the business and support the growth, as well as contribute to Stobart Air.
Virgin will have a 30.0 per cent controlling stake in Connect Airways; Stobart will also take the same interest, with its Irish-based airline already operating some of its flights via the Flybe brand.
Hedge fund Cyrus will hold the remaining 40.0 per cent of the consortium’s holding company.
Flybe is expected to be named after the airline of Sir Richard Branson – owner of Virgin – while Stobart Air will remain independent under its own brand.
The target claims to be one of the UK’s leading regional airlines and flies more UK domestic flights than any other carrier.
Flybe operates 190 routes, serving 12 countries from 73 separate departure points in the UK and across Europe, with 54.9 per cent of all flights within mainland Britain.
Connect Airways will finance the acquisition through cash resources.
Flybe recorded revenue of GBP 409.20 million in the six months to 30th September 2018, a 2.4 per cent decrease from GBP 419.20 million in the corresponding period of 2017.
Adjusted profit before tax improved 48.9 per cent to GBP 14.00 million in H1 2018 (H1 2017: GBP 9.40 million).
Zephyr, the M&A database published by Bureau van Dijk, shows there were 306 deals targeting air transportation groups announced in 2018.
China Eastern Airlines, Hainan Airlines Holdings, DHL Supply Chain and Deutsche Lufthansa, among others, were targeted last year.
© Zephus Ltd