LONDON—UK regional carrier Flybe has rejected a rival takeover bid from investors led by Mesa Air Group, which seeks to halt the sale of the airline to Virgin Atlantic- and Stobart Group-led consortium Connect Airways.

Flybe said it had received on Feb. 19 a “preliminary and highly conditional contingency proposal” from an investor group led by U.S.-based Mesa and Bateleur Capital, with indicative support from former Stobart CEO Andrew Tinkler. The proposal is for a capital injection, reported to be in the region of £65 million ($85 million), and replacement of funding provided by Connect Airways.

By comparison, Connect Airways offered Flybe Group £2.8 million for its operating subsidiaries, none of which is payable to shareholders. Instead, this money will be used to cover costs. Connect Airways also plans to acquire the holding company—a non-trading entity with no subsidiaries or material assets—for the original offer of £0.01 per share, which some shareholders believe grossly undervalues the company.

“As the investor group is aware, Flybe is bound by the terms of the SPA [share purchase agreement] to complete the sale of its operating subsidiaries to Connect Airways,” Flybe said, noting that it had already drawn down the first £15 million of a £20 million credit facility put forward by Connect Airways.

The airline added that its arrangements with credit card acquirers and banks are “vital” to enable the airline to continue trading, and that those arrangements are conditional on the SPA completing. 

“The board does not believe that the indicative proposal is executable in the time frame required to enable Flybe to continue to trade,” Flybe said. “Accordingly, the board emphasizes to shareholders that it continues to regard the arrangements entered into with Connect Airways as being the only viable option available to the company which provides the security that the business needs to continue to trade successfully.”

Flybe anticipates that the sale of its operating businesses to Connect Airways will be completed by Feb. 22. Under that deal, Connect Airways will acquire Flybe’s operating subsidiaries without a shareholder vote. This will be followed by the acquisition of Flybe’s holding company, which does require shareholder approval.