Air NZ lifts stake in Virgin Australia
Air New Zealand has increased its interest in Virgin Australia by 5% to 19.99%, the maximum allowed before being required to make a full takeover.
Duncan Bridgeman
Tue, 27 Sep 2011
Air New Zealand has increased its interest in Virgin Australia by 5% to 19.99%, the maximum allowed before being required to make a full takeover.
The shares were acquired through an equity derivative agreement with Deutsche Bank worth up to $32.8 million.
A condition of the agreement was the purchase did not cause Virgin Australia to breach its foreign ownership cap of 49% specified in the Australian Air Navigation Act.
Air New Zealand chief executive Rob Fyfe says there is no intention to make a takeover bid for Virgin Australia, something he confirmed to the Australian airline’s chief executive, John Borghetti, in a telephone call.
"Our increased investment in Virgin Australia continues Air New Zealand's strategy to develop scale and reach in this region," Mr Fyfe said.
The trans-Tasman Alliance with Virgin Australia was the first step in this strategy, followed by Air New Zealand’s initial investment in January of this year, he said.
"Our stake in Virgin Australia also provides us with an interest in the number two airline in Australia and, through this, access to opportunities in the growing Australian domestic market".
Air New Zealand had no intention to set it up its own domestic service in Australia but the "recent weakness" in Virgin's share price gave it a chance to take a bigger slice of an airline in which it has confidence.
"It's an opportunity to gain further exposure to Virgin Australia at an attractive price, reducing our average cost of entry from 44 cents per share to approximately 40," he said.
The National-led government, if re-elected on November 26, has said it would look at selling down its 73.7% share of Air New Zealand to 51%.
Duncan Bridgeman
Tue, 27 Sep 2011
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