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.
Flybe will combine with Stobart Airways in a joint venture called Connect Airways.
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 £20m bridge loan to Flybe and £80m 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.
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.
“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.
“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.”
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.”
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.”