Europe’s largest regional carrier Flybe has insisted its acquisition by a consortium led by Virgin Atlantic should go ahead next month despite the potential opposition of significant shareholders.
Flybe’s sale is due to be completed on February 22 after Virgin Atlantic stepped in to buy the airline as part of a Connect Airways consortium with Southend Airport-owner Stobart Group and investment firm Cyrus Capital.
The airline’s board accepted a bid of just £0.1 per share or £2.2 million for the UK-based group plus an immediate loan of £10 million to keep Flybe flying and a promise of up to £80 million in investment.
The consortium would also take on Flybe’s debts, with Virgin Atlantic owning 30%, Stobart 30% and Cyrus 40%.
The takeover terms were amended last week after it had “not been possible to satisfy” conditions attached to what was originally a £20-million loan, leaving Flybe “unable to draw any funds”.
The amended offer also saw the consortium offer an additional £2.8 million for Flybe’s main trading assets, the sale of which does “not require shareholder approval”.
Flybe confirmed this week: “Connect Airways has now provided the first £10 million of the £20 million secured committed credit facility.”
It said: “Flybe continues to receive payments from its card acquirers. The arrangements with the company’s credit acquirers and banks are important to enable Flybe to continue to trade and are conditional upon the Share Purchase Agreement [with Connect Airways] completing.
“The sale to Connect Airways of Flybe’s trading subsidiaries is expected to completed by February 22.”
However, the acquisition of the Flybe Group does still need shareholder agreement and Flybe’s two biggest shareholders appear ready to block it in pursuit of a better offer.
Investment group Hosking Partners, which holds a near 19% stake, wrote to Flybe’s directors last week saying: “The auction undertaken under the formal sale process has clearly not yielded a favourable outcome for all stakeholders and it seems the outcome has locked out any other bidder.”
Hosking was reported to be considering an injunction to halt the takeover process.
The estranged former boss of Stobart Group, Andrew Tinkler, also acquired a 12% stake in Flybe last week, making him the second-largest shareholder after paying four times the price of the takeover offer for the shares.
Tinkler is involved in litigation with Stobart which sued its former chief executive over allegations relating to Stobart’s previous attempt to buy Flybe in February last year.
He has denied Stobart’s claims and made counter allegations at a hearing which closed in December pending a ruling.
Tinkler insisted: “My investment in Flybe has nothing to do with the ongoing dispute with Stobart Group, it is purely an investment decision.”
But he added: “Flybe is an important part of the UK economy. I have huge faith in the potential of this business if it is provided with the right balance sheet structure and stakeholder support.”
Stobart and Flybe declined to comment, but in announcing the updated offer Flybe’s board noted it “was faced with a very tough decision based on Flybe’s current difficult liquidity position”.
Flybe was put up for sale in mid-November after issuing a profit warning in October. As recently as December, Flybe had a market value of £43 million.