Flybe shares tank as airline pushes on with 1p-per-share Virgin-led bid
Flybe’s shares sank as much as 47 per cent this morning as investors reacted to news that the struggling airline is pressing ahead with a takeover offer that will leave them an offer worth just 1p per share.
A Virgin-led consortium today provided the budget airline with the first £10m chunk of a bridging loan worth up to £20m to pay off creditors as it proceeds with a £2.8m takeover.
Shareholders will not get a vote on the bid from Virgin Atlantic, Stobart Group and US private equity firm Cyrus Capital, however, which is expected to complete by 22 February.
Read more: Flybe stock nosedives despite revised bid from Virgin consortium
The consortium has entered into a share purchase agreement (SPA) for the Flybe Limited and Flybe.com Limited assets, avoiding the requirement for shareholder approval after the airline moved its shares onto a standard listing this month.
“Flybe continues to receive payments from its card acquirers in accordance with the arrangements agreed at the time of the SPA being entered into,” Flybe told shareholders today.
“The arrangements with the company's credit card acquirers and banks are important to enable Flybe to continue to trade and are conditional themselves upon the SPA completing.”
Investors will get a vote on the consortium's separate £2.2m bid for Flybe Group, and are set to receive more details about the consortium’s 1p per share offer in the next few weeks, Flybe said.
It comes after Flybe’s biggest investor, Hosking Partners, threatened to challenge the Virgin-led bid in court, accusing Flybe’s directors of breaching their duties to shareholders.
Currently shares are worth 3.87p, down from 6.44p at yesterday’s close after investors pinned their hopes on Flybe receiving an improved bid.
Their optimism was fuelled by former Stobart Group boss Andrew Tinkler buying a 10 per cent stake ahead of the takeover.
Read more: Flybe's biggest shareholder threatens legal action over Virgin-led bid
Investors had hoped his share purchase would prove "to be a spanner in works, helping existing shareholders with a better offer", Michael van Dulken, head of research at Accendo Markets, told City PM
But Flybe immediately ran into difficulties as its financial situation meant it did not qualify for the first bridging loan offer made available by the consortium.
"Failure to meet the initial terms of the life-line bridge loan facility can’t have helped, giving bidders an even stronger hand and able to subsequently pounce on the whole thing," van Dulken said.