A consortium comprising Virgin Atlantic, the infrastructure Stobart Group and investment firm Cyrus has agreed to buy ailing U.K. regional carrier Flybe for 1p per share against a closing price of 16.4p per share, representing an equity value of £2.2 million compared to Thursday’s closing market capitalization of £26 million.
The new consortium will be called Connect Airways and Flybe will now adopt the Virgin Atlantic brand. The deal will see an initial £20 million bridging loan provided to ensure the continued smooth operating of the company, followed by a further investment of £80 million. Currently, Flybe has debts of £99 million. The carrier is the U.K.’s largest regional airline, operating 55% of its domestic flights outside of London.
Connect Airways will be 40 per cent owned by DLP Holdings, which belongs to funds managed by Cyrus; 30 per cent by Stobart Aviation; and 30 per cent by Virgin Travel Group, part of Virgin Atlantic. Connect Airways will also acquire Stobart Air, the group’s regional airline and aircraft leasing business. According to the new consortium, combining Flybe and Stobart with Virgin would “create a fully-fledged UK network carrier under the Virgin Atlantic brand”, with an “enhanced presence” at Heathrow and Manchester airports.
In the takeover announcement, the consortium advised credit-card businesses had been keeping cash from future Flybe bookings for their own security instead of passing it on, “and this change in position has materially and rapidly weakened the company’s unrestricted cash position.” (£1.00 = US$1.27 at time of publication.)
