LONDON (Alliance News) - Stobart Group Ltd said on Friday it has agreed to purchase budget airline Flybe Group PLC alongside Virgin Atlantic Ltd.
A new joint venture between Stobart and Virgin will be called Connect Airways Ltd, with DLP Holdings SARL also taking part. DLP is a Luxembourg-based company owned by funds managed by Cyrus Capital Partners LP.
DLP will own 40% of Connect, and Stobart and Virgin 30% each.
Connect will pay 1 pence per share to Flybe shareholders, valuing the company GBP2.2 million. Flybe shares closed Thursday at 16.38p each, giving it a market capitalisation of GBP35.5 million.
The joint venture said the offer price comes after "careful" due diligence, taking into account Flybe's capital needs, its difficult trading environment, and prevailing market conditions.
As part of the deal, Connect will provide a GBP20 million bridge loan for Flybe's operational requirements. Further, once the acquisition is completed, the partners will provide up to GBP80 million of further funding.
As part of the purchase of Flybe, the Connect Air joint venture will buy Stobart's regional airline and aircraft leasing business Stobart Air for GBP40 million and fold it into the expanded operation.
Flybe has accepted the offer, Connect Air said, with its board "unanimously" recommending shareholders accept the offer.
Flybe Chief Executive Christine Ourmieres-Widener said: "The industry is suffering from higher fuel costs, currency fluctuations and significant uncertainties presented by Brexit.
"We have been affected by all of these factors which have put pressure on short-term financial performance. At the same time, Flybe suffered from a number of legacy issues that are being addressed but are still adversely affecting cashflows."
"By combining to form a larger, stronger, group, we will be better placed to withstand these pressures," she continued.
"We aim to provide an even better service to our customers and secure the future for our people."
Stobart Chief Executive Warwick Brady commented: "The board of Stobart Group believes that bringing Stobart Air together with Flybe and partnering with Virgin Atlantic and Cyrus Capital is the best way for us to play an active role in UK regional flying.
"The combined entity will be a powerful combination with sufficient scale to compete effectively in the UK and European airline markets. It will allow us to continue to work with Flybe and provides an excellent opportunity to continue to grow passenger numbers at London Southend Airport."
