LONDON (Alliance News) - Flybe Group PLC on Friday said all of its assets and operations have now been sold to Connect Airways Ltd, although shareholder approval is still needed to complete the full acquisition.
Shares in Flybe were down 25% at 1.54 pence per share on Friday morning.
Flybe's two operating subsidiaries, Flybe Ltd and Flybe.com Ltd, were sold for GBP2.8 million, meaning that Flybe is now a non-trading entity and has no subsidiaries or material assets apart from the GBP2.8 million.
The separate sale of Flybe's entire issued share capital, however, still requires shareholder approval. Flybe advised its shareholders to back the deal, which values the company at just 1 pence per share or GBP2.2 million, or they are likely to receive "no value" for their Flybe shares.
It is not expected that any of the GBP2.8 million from the subsidiary sale will be distributed to shareholders, as the money is needed to "cover transaction, residual and rundown costs of the company".
If the deal is not approved, Flybe's directors will wind up the company. Flybe will shortly apply to the UK Financial Conduct Authority and the London Stock Exchange requesting the cancellation of its shares.
The shares will be cancelled on March 25 unless the acquisition is approved by shareholders, in which case the shares will be cancelled on March 11 when the acquisition becomes effective.
Connect is a joint venture among Stobart Group Ltd, Virgin Atlantic Ltd, and DLP Holdings SARL.
Following the formation of the joint venture, Stobart will dispose of its wholly owned Stobart Aviation Ltd subsidiary, as well as the entire issued capital of Stobart Air Unlimited Co, to Connect. This disposal is now unconditional. The sale of the two Stobart entities to Connect was done for GBP40 million in a mix of cash and loan notes.
The disposal of Propius Ltd and Propius Holdings Ltd to Connect also is now unconditional. This sale has now completed.
"The combination of Stobart Air and Propius with Connect Airways is expected to bring benefits to customers, suppliers and employees, providing stability in a tough trading environment," Stobart said.
Shares in Stobart were up 0.4% at 155.03 pence on Friday.
In January, Flybe agreed to the GBP2.2 million takeover offer from Connect. Prior to this, Flybe had an approximate market capitalisation of GBP35.5 million based on a share price of 16.38p.
Connect had agreed to provide a GBP20 million bridge loan as part of the initial deal, but Flybe could not meet the terms.
The acquisition was consequently restructured, with Connect paying GBP2.8 million for Flybe Ltd and Flybe.com Ltd instead of GBP2.2 million for Flybe Group PLC. Unlike the takeover, the subsidiary sale did not require shareholder approval.
On Tuesday, Flybe received a "preliminary and highly conditional" funding proposal from an investor group led by Bateleur Capital LLC and Mesa Air Group Inc.
The group is backed by former Stobart chief executive officer Andrew Tinkler and other unnamed institutional shareholders, Flybe said.
The proposed cash injection was conditional on Flybe's takeover by Connect Airways, a joint venture between Stobart, Virgin Atlantic Ltd, and DLP Holdings SARL, not proceeding.
However, Flybe maintained its belief that the takeover by Connect Airways is the only viable option.
"The board does not believe that the indicative proposal is executable in the timeframe required to enable Flybe to continue to trade," Flybe said.
Stobart has been engaged in a courtroom battle against Tinkler, who had his employment with the group terminated in June for "breach of contract and breach of fiduciary duty" after Stobart claimed he had "jeopardised" the future success of the group.
Last week, the UK High Court ruled the company's removal of Tinkler was lawful and valid.
