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Stobart Group agrees to acquire Stobart Air and Propius

The company said the acquisition will give it “effective control” over the pre-existing obligations it has in respect of the two businesses

Stobart Group Ltd - Stobart Group agrees to acquire Stobart Air and Propius
Southend Airport

Stobart Group Limited (LON:STOB) has agreed to acquire regional flight operator Stobart Air and aircraft leasing business Propius in a deal worth up to £8.55mln.

The aviation and energy group, which owns Southend Airport, said it will make an initial cash payment of £300,000, followed by a deferred consideration of £2mln to be paid before December 15 this year.

A contingent deferred consideration of up to £6.25mln will also be paid based on the equity value achieved on a realisation of value in respect of one or both of the businesses by Stobart Group before December 31, 2023.

READ: Stobart Group confirms deal talks with Connect Airways administrators

Stobart Air and Propius were both sold by Stobart Group last year as part of the formation of Connect Airways with Virgin Atlantic and Cyrus Capital that also saw the acquisition of FlyBe. Flybe, which had been Europe’s largest regional airline, collapsed and went into administration at the start of March.

Stobart Group said the acquisition will give it “effective control” over the pre-existing obligations it has in respect of the two businesses as it is a guarantor for various obligations of Propius following a sale and leaseback of aircraft arrangement which was entered into by Propius in April 2017, including maintenance commitments under the aircraft leases.

The company has also granted guarantees with respect to the obligations owed by Stobart Air arising under the franchise agreement with Aer Lingus and certain fuel and currency hedging arrangements entered into when the businesses were under Stobart Group ownership.

“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”, the company said in a statement.

"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”, said Stobart Group chief executive Warwick Brady.

“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 (coronavirus) 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", he added.

Shares in Stobart Group were down 2.7% at 61.3p in late-morning trading on Monday.

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