Esken concludes sale of Stobart Air and Carlisle Lake District Airport
Esken, the Carlisle-based aviation and energy infrastructure group which changed its name from Stobart Group earlier this year, has signed an agreement for the sale of its entire shareholdings in Stobart Air Unlimited Company and Stobart Air, to Ettyl Limited.
Stobart Air Unlimited operates regional flights under a franchise agreement for Aer Lingus and Stobart Air is the owner of Carlisle Lake District Airport.
The deal is expected to complete by early May.
Esken bought back Stobart Air and aircraft leasing company Propius in April 2020 from the administrator of Connect Airways, with the aim of seeking a new owner by February 28, 2021.
But the process was delayed due to Aer Lingus awarding preferred bidder status for an extension of the franchise to another party, and the impact of the extended coronavirus lockdowns halting most flight operations.
Ettyl is an Isle of Man-based company, registered in London and incorporated in May last year, backed by private investors.
It has agreed to pay £2 for Stobart Air, plus the value of any cash on the balance sheet on completion of the deal, together with a contingent sum of £7.5m, depending on certain trigger events at any point up to July 1, 2024.
Esken will make a payment on completion of the deal of up to £9.4m and will be responsible for the settlement of pre-completion liabilities totaling £25.8m, of which £19.1m are the subject of pre-existing parent company guarantees.
These sums represent unpaid creditors of £12.4m, which will be paid as they fall due in the months ahead and maintenance reserves of £13.4m, which will be paid towards maintenance obligations as they arise over the remaining term of the aircraft leases.
The deal also involves Esken taking full ownership of Propius for £1 and its lease obligations until April 2023. But Propius will be responsible for total lease payments of around £9m and will pay £15.5m in April 2023, which is the break fee under the existing leases.
Ettyl will also acquire Carlisle Lake District Airport for a cash consideration of £15m, plus the value of any cash on the balance sheet.
Should either the airport or Stobart Air be sold subsequently resulting in a gain to the buyer, Esken will be entitled to up to £30m in the first 12 months and up to £20m in the second 12 months following completion.
Esken said the disposal of Stobart Air is expected to result in a loss on disposal of approximately £8m after professional fees. The disposal of Carlisle Lake District Airport for £15m, is expected to generate a profit on disposal in excess of £10m.
David Shearer, Esken executive chairman, said “I am pleased to be able to announce these transactions today which are in line with our stated strategy at the time of the successful capital raise in June 2020.
“This has been a difficult and protracted process to conclude given the impact of the pandemic on air travel.
“Stobart Air remains a critical part of connectivity between Ireland and the United Kingdom and I am pleased that we have managed to secure the future of that business and its 480 staff under a new owner with ambitions to grow its network of routes.
“The sale of the airline presents a significantly better financial outcome than that resulting from a closure.”
He added: “Our operations at CLDA were peripheral to the main focus of our aviation business at London Southend Airport and we have taken this opportunity to tidy up our portfolio of businesses at a fair value in current markets allowing us to minimise future cash burn and avoid management distraction.”
He said the completion of the transactions will allow management to focus on the core operations of Stobart Energy and London Southend Airport, along with the aviation services business.
Stobart Air’s reported gross assets were £28.6m at August 31, 2020. For the full year ended February 29, 2020, Stobart Air (UK) Limited contributed a loss before tax of £24.3m and gross assets as at August 31, 2020 were £9.1m.