Go triumph for 3i

3i has signed a conditional agreement to sell budget airline Go to former rival easyJet less than a year after the investor bought it from British Airways. The deal is one of the most successful buyout investments in 3i’s history see deal of the month this issue.

Brian Larcombe, chief executive of 3i, said: “We are delighted to announce this deal which would deliver an exceptional return for investors. Our job is to deliver above average returns for our shareholders by backing dynamic entrepreneurs in growth sectors to build valuable businesses. There could be no clearer example of this than Go.”

3i and Barclays Private Equity bought a 62 per cent stake in the company in June 2001 for GBP83.5 million, as part of a deal valued at GBP110 million. Go is now being sold for GBP374 million in cash, taking into account GBP116.4 million net cash on the company’s balance sheet, this gives an enterprise value of GBP257.6 million and represents a profit of GBP231 million or 2.7 times money return for 3i.

Nineteen of Go’s senior managers invested in the original deal. Barbara Cassani, CEO, took a four per cent equity stake and in total 22.5 per cent of Go was held by the company’s employees. Although Cassani reportedly favoured independence and an eventual listing for Go, she said: “easyJet’s acquisition is a tremendous compliment to all of us at Go on our achievements since starting up four years ago. I’m particularly pleased that everyone at Go will share in the rewards from our success.”

The acquisitive airline, which has already bought British Airway’s German subsidiary DBA this month, will fund the deal with a GBP276.7 million rights issue, underwritten by Credit Suisse First Boston, UBS Warburg and Schroder Salomon Smith Barney.

In the year to March 31 2002 Go generated profits of GBP17 million on revenue of GBP233.7 million, compared to GBP4 million on a turnover of GBP159.7 million in the year preceding the management buyout. Passenger figures have spiralled from 1.88 million in 1999-2000, 2.76 million in 2000-2001 to 4.3 million in the twelve months before the recent deal.