Flybe Group PLC (LON:FLYB) soared on Monday morning amid reports that one of the airline’s biggest shareholders is looking to block a proposed cut-price takeover.
London-based asset manager Hosking Partners, which holds almost 19% of Flybe shares, has reportedly instructed lawyers to explore its options in relation to the firm’s proposed £2.2mln sale to a consortium backed by Virgin Atlantic and Stobart Group Ltd (LON:STOB).
READ: Stobart teams up with Virgin to take out Flybe
According to Sky News, this includes possibly obtaining an injunction stopping the deal from being completed.
The 1p-a-share offer, lodged almost two weeks ago, was recommended by Flybe bosses despite being at a huge discount to the prevailing share price.
In a letter to the airline’s directors – the Takeover Panel and Financial Conduct Authority were also copied in – Hosking Partners is said to have raised doubts as to whether the £2.2mln offer was a fair reflection of Flybe’s intrinsic value. It also alleged that the structure of the deal had blocked a rival offer from emerging.
READ: Stobart and Virgin agree to buy Flybe’s trading assets
Instead of a traditional bid for Flybe’s shares, Connect is buying the main trading assets for £2.8mln, leaving the holding company as a shell for which the consortium would continue to pay a nominal sum.
Flybe said last week that it had no choice but to agree to the restructured deal because it had failed to meet unspecified conditions attached to a bridging loan. It added that it is also in desperate need of a cash injection in order to keep trading.
But Hosking and other shareholders are said to be furious because Flybe’s standard listing means they will only get a say on the holding company bid and not the sale of the assets.
The fund manager is reportedly aware of other potential suitors but who are now unable to make a bid.
READ: Ex-Stobart boss takes 12% stake in Flybe
In a statement given to Sky, a Flybe spokesman said: “The board of Flybe was faced with a very tough decision based on Flybe's current difficult liquidity position and the expectation that this pressure will continue.
“Obtaining the revised facility, as announced on 15 January, from the consortium provides the security that the business needs to continue to trade, which preserves the interests of its stakeholders, customers, employees, partners and pension members.”
A Hosking Partners spokesman declined to comment on the contents of its letter, but said that investors were “entitled to transparency over precisely what has gone on to drastically reduce Flybe's value”.
“The auction undertaken under the formal sale process has clearly not yielded a favourable outcome for all stakeholders, and it seems that the outcome has locked out any other bidder who may be able to provide a better solution for all of Flybe's stakeholders.”
Flybe shares jumped 33% to 3.32p on Monday morning.