Published on May 3rd, 2020 | by Alan Dwyer0
Stobart Group Acquires Stobart Air and Propius
The Stobart Group has reached agreement with EY, the administrators of Connect Airways Ltd, to acquire Stobart Air and Propius. Propius is an aircraft leasing business that leases its eight ATR aircraft to Stobart Air. The value of the transaction is a payment of up to £8.55m on the following basis:
- An initial consideration of £300,000 payable in cash at completion;
- A deferred consideration of £2m to be paid no later than 15Dec20.
- A contingent deferred consideration up to a maximum of £6.25m based on the equity value achieved (after disposal costs) on a realisation of value in respect of one or both of the businesses by Stobart Group prior to 31Dec23, by reference to:
- 75% of the first £5m of equity value being a payment of up to £3.75m;
- 50% of the next £5m of equity value being a payment of up to £2.5m; and
- Any equity value above £10m is retained by Stobart Group
Stobart Group expects to fund the operations of Stobart Air and Propius over the period through to achieving positive cash flow. The businesses have actively sought to reduce their cash requirements during the COVID-19 period and Stobart Group expects to fund in the order of €25m over the next 12 months, including the lease payments referred to below.
The Transaction, which has now been completed, will result in Stobart Group acquiring:
- a 40% voting interest and 75% economic interest in the ultimate holding company of both Stobart Air and Propius (known as Everdeal 2019 Ltd); and
- a 15% shareholding in the company that holds the remaining 60% voting interest and 25% economic interest in such holding company, with the Stobart Air Employee Benefit Trust retaining the balance.
This will provide the Company with an effective indirect economic interest of 78.75% in Stobart Air and Propius. This structure was in place prior to the Connect Sale and is required to ensure that Stobart Air meets the requirements of its Air Operator Certificate to operate out of Ireland.
Warwick Brady, CEO of Stobart Group, 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 Mar20. 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.”
Stobart Air operates flights under the Aer Lingus Regional brand and previously operated some services on behalf of FlyBe in the UK which entered administration and ceased flying on 5th March. The deal to fly on behalf of Aer Lingus runs until 2022 and the future of this deal will be seen a crucial in the future of Stobart Air.
Stobart Air was formed when the original Aer Arann was purchased by the Everdeal Holdings Group in 2014 which owned the Stobart transport company in the UK. Stobart Air have a current fleet of eleven ATR-72 and one ATR-42 aircraft. Previously, Stobart Air have operated Embraer EMB-190 on lease for FlyBe and some of these have now been leased on to Great Dane Airlines through their aircraft leasing partner Propius Leasing.