Something odd is happening at Virgin Australia and one of its largest shareholders, Air New Zealand, which is controlled 53% by the NZ government.
A week after coughing up $131 million as part of the $420 million new shareholder loan to Virgin, Air New Zealand is now looking to sell its stake and has appointed Credit Suisse to do the deed. The Air NZ Virgin stake is worth just under $350 million at yesterday’s lower close.
Officially, the Air NZ statement said it is reviewing its shareholding in Virgin Australia, but seeing that includes a possible sale, and Credit Suisse and a NZ investment bank were involved.
But the news came a week after that fund raising was announced and the change of heart by the Kiwi airline is unclear.
Air NZ said yesterday that it is “exploring options” for its shareholding and had asked financial group First NZ Capital and Credit Suisse to advise it on its options.
As a result, Air NZ CEO Christopher Luxon is resigning from Virgin’s board immediately given the decision.
Air New Zealand is Virgin’s biggest shareholder with a 25.9% stake. The other big shareholders are Etihad Airways with 24.2% and Singapore Airlines with 22.8%.
Air New Zealand chairman Tony Carter was quoted in the group’s statement today as saying it does not want a large minority equity position in Virgin Australia “as it focuses on its own growth opportunities” .
That is also odd because these “growth opportunities’ should have been clear last week. It sounds like there has been a big change of heart inside Air NZ and perhaps its major shareholder, the Kiwi government.
Air NZ said in yesterday’s statement that it intends to co-ordinate its plans with Virgin Australia’s broader review of its capital structure.
Mr Luxon said the airline was supportive of the transformation that Virgin Australia had undergone over the past five years under John Borghetti’s leadership.
“We look forward to continuing our partnership on the Tasman alliance, providing customers of both airlines with the most comprehensive trans-Tasman network,” Mr Luxon said.
Air New Zealand intends to co-ordinate its review of its investment in Virgin Australia with that airline’s broader capital structure review.
Virgin shares fell 9.3% yesterday, with most of the fall happening after the halt was lifted and the shares fell from 37.5 cents to the closing 34 cents..
Air NZ shares were steady on $2.57 on the ASX.
