For a company that is increasingly irrelevant to investors, Virgin Australia certainly generates a lot of news.
From shareholder changes, to the normal travails of an airline, to profit and capital concerns, fuel prices and shareholder unrest, Virgin has attracted publicity like a honeypot attracts bees.
And all this for a company where small investors and institutions control 20-25% of the shares (the free float) at best and the shares struggle to gain altitude, unlike the rebound in Qantas shares in the past 18 months.
There’s mass cheering when the shares venture over 40 cents and something always seem to come along to knock them lower. Lately it has been the tooing and frooing between Air NZ, a major shareholder, and the airline’s management and other shareholders.
Air NZ wanted to axe the CEO, John Borghetti, but failed and make other changes, so in defeat it decided to do the Wall Street walk and sell its 25.9% stake in a decision announced in March.
In the mean time, Virgin’s board management to find a new friend in the shape of Chinese conglomerate, HNA, which paid 30 cents a share for a 13% stake last week, with plans to build that to 19.9%.
This morning Air NZ produced its surprise Chinese shareholder – in the shape of little known conglomerate, Nanshan Group (which owns a hotel at Sydney airport, according to this morning’s media reports.
Nanshan Group has agreed to purchase a 19.9% stake from Air New Zealand for around $232 million at 33 cents a share.The news was revealed in a statement to the ASX before 8 am on Friday.
Nanshan joins Singapore Airlines, Etihad Airways, HNA and Sir Richard Branson’s Virgin Group as major investors in Virgin Australia. The Nanshan purchase of the Air New Zealand stake remains subject to regulatory approval.
Air New Zealand had participated with Singapore Airlines, Etihad and Virgin Group in making a $425 million loan to Virgin in March which helped bolster the airline’s balance sheet.
The airline is looking to raise up to $800 million in an entitlement issue (meaning the big shareholders will have to either tip in new money or convert the loan to equity). That raising is expected to be announced this month.
Air New Zealand said this morning that Nanshan intended to support the outcome of Virgin’s capital structure review. Air NZ says it will look at what to do with the rest of its stake in Virgin in “due course”.
“We believe Nanshan Group will be a very strong, positive and complimentary shareholder for Virgin Australia,” Air New Zealand chairman Tony Carter said in a statement to the ASX. “The sale will allow Air New Zealand to focus on its own growth opportunities, while still continuing its long-standing alliance with Virgin Australia on the trans-Tasman network".
Fairfax Media said Nanshan is a large privately owned Chinese conglomerate which owns a small airline in China, Qingdao Airlines, along with interests in sectors spanning aluminium, agriculture, education and property. It has some other interests in Australia, including the Pullman Sydney Airport hotel, which it purchased last year for $84 million.
