Shares in UK regional airline Flybe (FLYB) collapse 83% on Friday to 2.9p after the board recommends a bid at 1p per share from a consortium led by Stobart Group (STOB) and Virgin Travel.

The bid values Flybe at just £2.2m or 94% less than its market capitalisation last night.

At its IPO in 2010 Flybe was valued at £215m and even 12 months ago it still boasted a market capitalisation of around £100m.

For investors who were holding on in the hope of a bid battle developing, this is game over.

FLYBE IN POOR SHAPE

For the Flybe board to recommend the 1p per share offer as 'fair and reasonable' suggests the company was in dire financial straits.

Christine Ourmieres-Widener, chief executive of Flybe, acknowledged that the airline had ‘suffered from a number of legacy issues’ which were still negatively impacting cash-flows.

By forming a larger, stronger group it will be ‘better placed’ to withstand the pressures of higher fuel costs and Brexit uncertainty and ‘secure the future for our people’ added the chief executive.

High fuel costs and downward pressure on prices have already forced several budget airlines into administration such as Cyprus's Cobalt, Denmark's Primera and the UK's Monarch.

DEAL ADDS SCALE FOR STOBART

Shares in aviation and energy group Stobart (STOB) are trading 7% higher at 160p on today's news.

The joint venture, Connect Airways Limited, brings together Stobart Group with a 30% stake, Virgin Travel with a 30% stake and Luxembourg-based fund group Cyrus Capital Partners with a 40% stake.

As well as paying 1p per share for Flybe stock, Connect is providing a £20m bridge loan facility to support Flybe’s ongoing working capital and operational needs.

The partners will also provide Connect with up to £80m of additional funding to support future growth and Stobart Group will fold in Stobart Air.

For Stobart Group, which had already run the slide rule over Flybe a year ago, the deal gives it scale to compete in the European short-haul market and to grow passenger numbers at Southend airport.

For Virgin the deal adds a short-haul partner to connect to its long-haul operations out of Heathrow and Manchester airports.


Issue Date: 11 Jan 2019