Struggling regional carrier Flybe has rejected a last-ditch proposal to shore up its finances which would have scuppered a takeover led by Virgin Atlantic.
Flybe said it did not believe the “highly conditional” plan, backed by a consortium including Arizona-based Mesa Air, could be carried out in a timeframe to allow it to continue to trade.
The rejection came hours after Sky News revealed that the consortium – also backed by New York-based investment group Bateleur Capital – had tabled an offer to inject £65m of new equity into Flybe at a price of 4.5p a share.
That is significantly more than the value being offered by the Connect Airways consortium, which consists of Sir Richard Branson’s Virgin, Stobart Group and investment firm Cyrus Capital.
Despite the rejection, shares more than doubled to 2.9p after details of the new offer – which has the backing of Flybe’s second largest investor, Andrew Tinkler, and a number of others – was revealed.
Flybe said it saw the existing Connect offer as the “only viable option available to the company which provides the security that the business needs to continue to trade successfully”.
It said it had already drawn down £15m in working capital from Connect as part of the deal.
The emergence of the rival proposal came just three days before the sale of Flybe’s operating assets to Connect.
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 rival offer to save the company came just 72 hours after Flybmi, an unconnected company, collapsed into administration.
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.
(c) Sky News 2019: Flybe rejects move to scupper Virgin takeover