An Arizona-based commuter airline is backing a proposal to shore up the finances of Flybe, the struggling regional carrier, in a last-ditch effort to scupper a takeover led by Virgin Atlantic Airways.
Sky News can exclusively reveal that Mesa Air Group, which is headquartered in Phoenix, is part of a consortium which has tabled an offer to inject £65m of new equity into Flybe.
The rival proposal is understood to have been submitted to Flybe’s board, chaired by Simon Laffin, on Tuesday afternoon.
Flybe chairman Simon Laffin
People close to the company said the refinancing plan was being led by Bateleur Capital, an investment firm which focuses on industries including aviation.
The offer is also said to have support from Avenue Capital, the US hedge fund, and is conditional on a previously agreed deal with Virgin being abandoned.
Under the terms proposed to Flybe, the rival consortium would inject £65m of new equity issued at a price of about 4.5p-a-share – which is significantly more than the total value of an offer from Virgin Atlantic and its partners.
The offer would be accompanied by new debt facilities and potential asset sales which in total would provide new funding to Flybe worth about £120m.
One insider said on Tuesday night that the Mesa Air and Bateleur Capital proposal had been given indicative support by Hosking Partners and businessman Andrew Tinkler, who between them control just over 30% of Flybe.
Under the plan, Flybe would remain listed on the London Stock Exchange.
The emergence of the rival proposal comes just three days before the sale of Flybe’s operating assets to Connect Airways – the consortium comprising Virgin Atlantic, Stobart Group and Cyrus Capital.
It is the latest twist in a cut-price takeover saga that has gripped the City in recent weeks.
Hosking Partners, which owns 19% of Flybe, has expressed fury at its board’s decision to recommend Connect Airways’ 1p-a-share offer for the holding company while selling its main assets in a separate deal worth just £2.8m.
The latter transaction, which does not require shareholder approval, is due to take place on Friday, meaning Mr Laffin and his colleagues will have to decide as a matter of urgency whether the recapitalisation proposal has sufficient certainty to justify switching its backing.
Hosking has nominated Eric Kohn, an experienced aviation financier, to join Flybe’s board as a new independent chairman, with an extraordinary shareholder meeting likely to be scheduled for the next few weeks.
Flybe is Europe’s biggest regional airline and one of Britain’s best-known aviation brands.
The rival offer to save the company came just 72 hours after Flybmi, an unconnected company, collapsed into administration.
Flybe has argued that the restructuring of its deal with Connect Airways had been made necessary by its urgent need for liquidity, with the consortium extending an emergency £10m bridging loan.
Mr Tinkler attacked the deal this week in comments to the Financial Times in which he described it as “an insult to the aviation industry”.
Flybe shares closed on Tuesday at 1.3p, giving it a market value of just £3.47m.
Investors’ anger at the bid process has been exacerbated by the fact that early last year, Stobart made a takeover approach to Flybe understood to have been valued at roughly 40p-a-share.
This was rejected by Flybe’s board.
Until the last few weeks, it appeared that Virgin Atlantic and Stobart were likely to table competing offers for the regional airline, before it emerged that they had teamed up as part of the same consortium.
Hosking has raised concerns about the process through which they formed an alliance, and has highlighted the recent rise in Stobart Group’s shares as evidence of a value transfer from Flybe to its prospective acquirers.
Under their plans, Stobart Air will be folded into Connect, with all of Flybe’s services rebranded under the Virgin Atlantic name.
Flybe launched a formal sale process last autumn, blaming a toxic cocktail of currency volatility, rising fuel costs and Brexit-related uncertainty.
An industry price war has also exacerbated airlines’ financial troubles, with Ryanair blaming the issue for a recent profit warning.
Flybe and Hosking Partners declined to comment, while neither Bateleur Capital, Mesa Air or Mr Tinkler could be reached for comment.
