3i and Barclays Private Equity have backed the management buyout of British Airways budget subsidiary, Go Fly, in a GBP110 million deal. Tom Sweet-Escott, 3i director, said, “This investment reinforces our commitment to the larger buyout market.”
In November 2000 Goldman Sachs was appointed to advise on the sale of Go after BA announced the airline no longer fit its strategy. BA’s restructuring, aimed at restoring previous profit levels, included the sale of French subsidiary Air Liberte in May last year.
For the Go deal, BA provided GBP20 million loan notes and will also get GBP10 million in preferential shares if 3i exits within an agreed, but undisclosed, timeframe.
Bidders for Go are reported to have included Electra and the Carlyle Group.
Alex Williams, investment manager at 3i, highlighted his firm’s experience in the sector as key to winning the deal. He said, “3i is very interested in doing further deals within the transport and logistics sector, throughout Europe, in the future.”
Nineteen of the company’s senior managers have invested in the deal and all of Go’s employees will be offered share options. In total 22.5% of Go will be held by the company’s employees. CEO Barbara Cassani claims a 4% equity stake – she will continue in the position of chief executive at Go and lead the company’s aggressive growth strategy. This expansion includes increasing the number of flights on busy routes, introducing new routes and opening further operating mini-bases in Europe. Go will be looking for a stock market floatation within the next couple of years.
Since the transaction was completed, British Airways has launched a new range of low price flights and Go has retaliated by offering seats at half the price of BA’s cheap flights.
Go announced annual profits of GBP4 million on a GBP159.7 million turnover for the year to March 31, 2001, despite previous heavy loses. The carrier’s passenger numbers have also risen to 2.76 million this year; a 46% increase on last year’s figure of 1.88 million. Cassani said: “These results show that we have built a really strong business that challenges the competition head on with low prices and great services. Our people deserve the credit for Go’s success and that is why I want them to become co-owners of the airline.”
The London Stanstead-based company started flying in May 1998.