Stobart Group completes acquisition of Stobart Air and Propius in £8.55m deal
The Stobart Group has today (April 27) agreed an £8.55m deal to acquire Stobart Air and Propius from business advisor EY, the administrators of Connect Airways.
Carlisle-based Stobart revealed on April 16 that it was considering the aquisition of the two businesses.
Propius is an aircraft leasing business that leases its eight ATR aircraft to Stobart Air.
Stobart Air operates regional flights under a franchise agreement for Aer Lingus, along with the provision of charter and wet lease operations.
The businesses were owned previously by Stobart Group and were sold to Connect in February 2019.
Connect is a joint venture between Stobart, Virgin Atlantic and Cyrus Capital Partners that was formed to acquire Flybe in February 2019, alongside the Connect sale.
The Stobart Air and Propius businesses had continued to operate independently within Connect and were, therefore, unaffected by the Flybe administration.
The board of Stobart Group said it had reviewed all options available in relation to the future of Stobart Air and Propius following the administration.
This included allowing the businesses to enter some form of insolvency process and a range of ways to support them going forward, particularly in light of the strong relationship which exists between Stobart Group and Aer Lingus.
The board concluded that the best course of action, financially for the company and its shareholders, is for it to buy back Stobart Air and Propius.
The intention is that Stobart Group will continue its current positive dialogue with Aer Lingus to conclude a long-term franchise extension and ensure that the businesses are put on a sound financial footing.
Stobart Group said its aviation strategy has not changed as a result of this transaction and the company will work with Aer Lingus to identify a new financial partner to support the business for the future, with Stobart Group exiting its involvement at the appropriate time.
The group said it expects to fund the operations of Stobart Air and Propius over the period through to achieving positive cash flow.
Stobart expects to fund in the order of £21.88m over the next 12 months.
The value of the combined gross assets of Stobart Air and Propius as at August 31, 2019 was £91.2m.
Warwick Brady, Stobart Group chief executive, said: “This transaction allows Stobart Group to take control of the outstanding legacy issues which date back to 2017 when Stobart Air and Propius became subsidiaries of the company.
“The original strategy to mitigate these issues over time through the combination of the businesses with Connect was impacted by the failure of Flybe and resulting administration of Connect in March 2020.
“We believe that Stobart Air has a viable future after COVID-19 and are working with Aer Lingus as our franchise partner to place the business on a secure footing and manage the impact of the legacy obligations in a controlled manner.”
Jonathan Brown, Hill Dickinson chairman and a partner in its corporate team, together with senior associate Elan Iorwerth, acted as general counsel to Stobart on the deal.
Freshfields and BCLP acted for the administrators.