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MoneyTroubled Flybe rescued in cut-price takeover deal

03:41  12 january  2019
03:41  12 january  2019 Source:   news.sky.com

Flybe deal restructured after financing loan woes

Flybe deal restructured after financing loan woes The buyers have offered a revised bridge loan of up to £20 million, with £10 million released immediately to ‘support the business’.

Image: Flybe is being snapped up in a cut - price deal . Although it is small in financial terms, Flybe remains one of the UK's best-known airline brands, carrying thousands of passengers between largely second-tier British airports as well as European destinations.

The deal , confirmed by a person with knowledge of the transaction, will involve the consortium running Flybe ’s flights alongside those provided by Stobart Air, a subsidiary of the infrastructure Flybe put itself up for sale last November as it struggled with falling profits, a weaker pound and rising oil prices .

Troubled Flybe rescued in cut-price takeover deal © Getty Although small in financial terms, Flybe is one of the UK's best-known airline brands

A takeover has been agreed of the troubled regional airline Flybe in a £2.2m deal by a consortium led by Richard Branson's Virgin Atlantic.

The move, previously revealed by Sky News' Mark Kleinman, offers just 1p per share, significantly less than the company's closing price of 16.38p on Thursday.

Shares were 90% down on market opening, reflecting the massive markdown in the value of the company.

The consortium, which includes Stobart Group and Cyrus Capital Partners, will form a new airline group.

Troubled Flybe rescued in cut-price takeover deal © 2018 Getty Images EXETER, ENGLAND - OCTOBER 18: A Flybe airline sign is pictured at Exeter Airport near Exeter on October 18, 2018 in Devon, England. The value of shares in the Exeter-based airline Flybe, have fallen dramatically recently after the company issued another profit warning, blaming poor demand, a weaker pound and higher fuel costs.(Photo by Matt Cardy/Getty Images) Flybe will combine with Stobart Airways in a joint venture called Connect Airways.

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The deal , confirmed by a person with knowledge of the transaction, will involve the consortium running Flybe ’s flights alongside those provided by Stobart Air, a subsidiary of the infrastructure Flybe put itself up for sale last November as it struggled with falling profits, a weaker pound and rising oil prices .

Cyrus will own 40% of the new company, while Virgin and Stobart will each take a 30% share.

Under the deal, the three firms will also provide a £20 million bridge loan to Flybe and £80 million of further funding to the combined group.

The takeover comes less than two months after Flybe put itself up for sale, blaming currency volatility, rising fuel costs and Brexit-related uncertainty.

Although small in financial terms, Flybe remains one of the UK's best-known airline brands, carrying thousands of passengers between mainly regional UK airports as well as European destinations.

Troubled Flybe rescued in cut-price takeover deal © Nicolas Economou/NurPhoto Flybe Embraer ERJ-195LR (ERJ-190-200 LR) with registration G-FBEG is landing at Amsterdam Schiphol International Airport in the mist in The Netherlands. Flybe connects Amsterdam to Birmingham, Doncaster Sheffield, East Midlands, Exeter, London City, Manchester and Southampton. The airline has a fleet of 78 aircraft. Flybe is suffering of financial difficulties and there are talks with Virgin to buy - rescue the airline. (Photo by Nicolas Economou/NurPhoto via Getty Images) Flybe chief executive Christine Ourmieres-Widener said: "Flybe plays a vital role in the UK's transport infrastructure with a UK regional network which positions it well to benefit from growing demands from long haul carriers for passenger feeder traffic.

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The takeover is the first in which the European Central Bank has determined that a eurozone lender has failed or is about to fail. That new system appeared to pass its first test on Wednesday, as authorities efficiently dispatched a troubled Spanish lender.

"However, 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.

Troubled Flybe rescued in cut-price takeover deal © Nicolas Economou/NurPhoto Flybe Embraer ERJ-195LR (ERJ-190-200 LR) with registration G-FBEG is landing at Amsterdam Schiphol International Airport in the mist in The Netherlands. Flybe connects Amsterdam to Birmingham, Doncaster Sheffield, East Midlands, Exeter, London City, Manchester and Southampton. The airline has a fleet of 78 aircraft. Flybe is suffering of financial difficulties and there are talks with Virgin to buy - rescue the airline. (Photo by Nicolas Economou/NurPhoto via Getty Images) "By combining to form a larger, stronger, group, we will be better placed to withstand these pressures. We aim to provide an even better service to our customers and secure the future for our people."

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This case looks at the events that led up to the takeover and examines some of the strategic decisions of the recent past which may have triggered the process. It discusses the financing and timing of the deal in the turbulent financial markets of 2007 and raises questions about the future.

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Virgin Atlantic chief Shai Weiss said: "Together, we can provide excellent connectivity to our extensive long haul network and that of our joint venture partner, Delta Air Lines, at London Heathrow Airport and Manchester Airport for the benefit of our customers.

"In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM."

Troubled Flybe rescued in cut-price takeover deal © 2018 Getty Images EXETER, ENGLAND - OCTOBER 18: A Flybe airline flag is pictured at Exeter Airport near Exeter on October 18, 2018 in Devon, England. The value of shares in the Exeter-based airline Flybe, have fallen dramatically recently after the company issued another profit warning, blaming poor demand, a weaker pound and higher fuel costs.(Photo by Matt Cardy/Getty Images) Warwick Brady, chief executive of Stobart Group said "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."

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