Flybe investors face hard landing in Connect deal

INVESTORS in Flybe have succumbed to a sinking feeling, as hopes evaporated that a white knight buyer may table a higher bid for the struggling airline.

Virgin Atlantic, Stobart Group and investment company Cyrus Capital last week joined under the name of Connect Airways to put up a £2.2m offer for Flybe, paying shareholders 1p per share.

Though the price was raised yesterday to £2.8m, to prevent Flybe from failing before the deal concluded, shares in the airline fell 41.8pc, or 1.7p, to 2.4p. Investors will still get only 1p per share, and the extra £600,000 will go towards running the company.

Before Connect’s approach, Flybe was trading at a value of £35.5m as investors hoped a buyer would rescue it for a sizable sum.

Even after the £2.2m bid from Connect, it was still trading at a value of £8.9m on Monday, implying shareholders were confident a buyer with deeper pockets would emerge. That hope disappeared yesterday. As part of its original bid, Connect agreed under certain conditions to loan Flybe up to £20m to keep it afloat.

But Flybe revealed it was unable to meet certain conditions of the loan, largely because it failed to negotiate more lenient terms with credit card companies that process its customer transactions. These lenders had been clinging on to a chunk of every transaction they processed, due to fears Flybe might go bust and its customers would attempt to claim back their money.

The revised deal will see Connect take hold of Flybe’s main trading arm, Flybe Ltd, and the digital arm Flybe.com by February 22.

Britain’s gambling companies were also on a downwards slide, as the US Justice Department looked set to tighten restrictions on internet betting firms.

The shift was a slap in the face to many investors who had taken a punt after the US moved to legalise sports betting last year.

Players such as William Hill, Ladbrokes Coral owner GVC and

888 stepped into the US market following the Supreme Court ruling. They had hoped for a boom, but all online gambling may now be restricted.

Yesterday, the Justice Department’s criminal division, which prosecutes illegal gambling, issued a new opinion in which it said the law has been misinterpreted for several years.

Its previous guidance, that restrictions applied only to online sports betting, was wrong, and they should instead apply to all online gambling.

GVC shares slid by 2.8pc, or 19.5p, to 675.5p, while 888 was down 7.5pc, or 13.4p, to 164.3p. William Hill lost 2.9pc, or 4.85p, to close at 163.7p, while Paddy Power Betfair was 0.8pc, or 50p, lower at 6210p.

The FTSE 100 rose 40 points to end the day at 6895.02. Investors were disappointed in The Gym

Group, even though membership for 2018 grew 19.3pc to 724,000 and revenue rose 35.6pc to £123.9m. Its rapid expansion, which saw 30 sites open last year, has resulted in extra costs, and profit would be around £37m, lower than estimates of £38.6m from analysts at Liberum. Shares fell 7.8pc, or 17.5p, to 207.5p.

Predictions of a gloomy 2019 from estate agent Savills caused it to dip 4.8pc, or 36.5p, to 728p, despite a solid year. It said: ‘Prospects for 2019 are overshadowed by macro-economic and political uncertainties across the world.’

As a result, it expects sales to fall in a number of markets. Private hospital company Spire

Healthcare sank 11.9pc, or 13.9p, to 102.7p after it hinted it would miss its previous profit aims. It expects 2018 profits to be between £119m and £120m, down from guidance of £120m to £125m.