Flybe Group has warned its shareholders that the company will be wound up unless they vote to accept a Connect Airways Ltd offer.
Connect Airways Ltd. is a consortium whose shareholders include Virgin Atlantic, Stobart Group, and private equity firm, Cyrus Capital.
Under its offer, Connect Airways will acquire the group's subsidiaries - flybe. (2002) (Exeter) (including Flybe Aviation Services Ltd) and the digital company Flybe.com Ltd for GBP2.8 million (USD3.61 million). This would then leave the group holding as a non-trading entity with no subsidiaries and no material assets other than the cash remaining from the subsidiary sale. Connect Airways will then acquire Flybe Group's entire shareholding for GBP0.01 (USD0.0129) per share or around GBP2.2 million in total.
The board said in a stock market disclosure that it had been forced to accede to the subsidiary sale after it had failed to meet the conditions required for it to tap into a Connect Airways' loan facility of GBP20 million (USD25.85 million). It blamed the move on the company’s credit card acquirers who were unwilling to increase their exposure over the period running up to the change in ownership.
"Because in the time available there were no other parties in a position to meet both Flybe’s funding needs and the requirements of Flybe’s banks and credit card acquirers, the Flybe Directors concluded, and were so advised, that the only way to avoid Flybe and Flybe Limited having to be placed into administration was to enter into a new agreement to sell Flybe’s operating subsidiaries to Connect Airways, thereby preserving the interests of Flybe Shareholders and stakeholders, including customers, employees, pension scheme members and other creditors," it added.
However, given increased shareholder resistance to the sale, the board has warned that if the purchase of the Group holding company is not approved, then shareholders stand to earn nothing.
"Following completion of the subsidiary sale, if the [group holding sale] scheme is not approved, the Flybe Directors intend to take steps to wind-up the Company and Shareholders are likely to receive no value for their shares in Flybe," it warned. "Accordingly, the Flybe Directors believe that the terms of the Acquisition remain in the best interests of Flybe Shareholders as a whole and unanimously recommend that Flybe Shareholders vote in favour of the resolutions to be proposed at the Court Meeting and the General Meeting [both to be held on March 4]."
