Has a rare chance emerged for a one off deal involving two of the major parts of Richard Branson's Virgin aviation empire?
Toll Holdings is nearing the end of a review of its ownership of the 62 per cent-owned Virgin Blue and now there's reports from London that the 49 per cent stake in Virgin Atlantic, presently held by Singapore Airlines, could be 'under review'.
This review, according to a report in the London Telegraph newspaper, is at an early stage, but could see the 49 per cent stake sold, put up for auction, or perhaps even combined with other interests into a float.
Branson's Virgin group owns 51 per cent of Virgin Atlantic and hasa 26 per cent holding in Virgin Blue where Toll is firmly in control.
Toll CEO, Paul Little, last month ruled out a sale of thestake in VBA in the near future but brokers suggest the possible combination with the minority stake in Virgin group, could offer significant advantages.
Toll has spun off its infrastructure business (much of it acquired, along with VBA in the Patrick takeover) into a separate listed company, Asciano Group.
Little said selling the VBA stake is one ofmany options, but Toll believes it can continue to add value to the business and will hang on to it.
That's always been an important qualification in Toll's statements on the VBA holding.
Stimulated by the corporate activity around Qantas earlier in the year, several brokers have suggested Toll could exit Virgin Blue but have pointed out the only way to maximise the investment would be to sell it in one line to a single buyer.
A private equity fund (like TPG, one of the near buyers of Qantas) would be a logical candidate.
That has been wishful thinking up till now. But the possible appearance of 49 per cent of an airline that flies into Australia via Hong Kong could be the catalyst for another look at VBA in some sort of package deal.
Singapore Airlines paid £600m (around $$A1.6 billion) for its 49 per cent of Virgin Atlantic eight years ago, effectively helping Branson out of a hole caused by financial problems with his failed Virgin express discount airline in Europe.
At the same time he was launching Virgin Blue in Australia and needed capital for that and some other deals in his sprawling Virgin Group.
According to The London report, the 49 per cent of VA could be worth between £900m and £1 billion (or around $A2.3 billion). VBA is valued at around $A1.6 billion. The two stakes could be packaged up, and then floated; giving VBA has a bigger stake in an overseas business. It is planning to extend itself across the Pacific next year to the US
TPG has been looking at possible deals with Italy's Alitalia (abandoned) and Spain's Iberia (could happen).
Combining with the Virgin Group and VBA in a merger and then refloat, could build a business that was more far reaching than Qantas: if Singapore remained a cornerstone investor, it would be very interesting (a cornerstone investor might hold 25 per cent).
This may not happen but Australian analysts note that Branson seems to be changing tack. He is trying to expand deeper in radio in Britain for example, while entertaining possible private equity interests in NTL, the British cable, telecoms and internet firm that is the second biggest Pay TV provider in the UK.
Another interesting deal has surfaced with Virgin Group about to sign a $A24m deal this month to acquire a 20% stake in Fly Asian Xpress, a Malaysian budget long-haul carrier co-founded by Tony Fernandes in Malaysia.
That could put Virgin in direct competition with Singapore in the region and the likes of Tiger Airlines (which has TPG involvement).
Qantas and its Jetstar offshoot are trying to grow in the south east Asian discount airline market. So far it has been tough going.
