Air NZ to sell bulk of Virgin stake to Chinese conglomerate

written by australianaviation.com.au | June 10, 2016
VIRGIN AUSTRALIA AIRCRAFT SYD APR15 RF 5K5A1324
Virgin Australia is likely to have three airlines and two Chinese companies on its share register. (Rob Finlayson)

Virgin Australia looks set to have a second major investor from China on its share register after Air New Zealand announced plans to sell the bulk of its stake in the Australian carrier to diversified conglomerate Nanshan Group.

In a statement to the Australian Securities Exchange and New Zealand’s NZX on Friday (the airline is dual-listed), Air New Zealand said it had agreed to sell a 19.98 per cent stake in Virgin Australia to Nanshan Group for A$0.33 a share.

The sale was subject to regulatory approval from Chinese authorities.

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“We believe Nanshan Group will be a very strong, positive and complimentary shareholder for Virgin Australia,” Air New Zealand chairman Tony Carter said.

“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.”

Air New Zealand flagged its intention to sell down its 26 per cent stake in Virgin on March 30. On the same day, its chief executive Christopher Luxon also resigned as a Virgin board member.

The proposed transaction adds another major shareholder to an already crowded Virgin share register that already includes Singapore Airlines, Etihad Airways and Sir Richard Branson’s UK-based Virgin Group.

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Further, Virgin announced on May 31 the parent company of Hainan Airlines, HNA Group, would take an initial 13 per cent equity stake in the Australian company for A$159 million, or A$0.30 a share, through the issuing of new shares.

The deal also included a commercial partnership between the two parties, with Virgin planning to begin flights to Hong Kong and Beijing from a yet-to-be-disclosed Australian city by mid-2017.

“This strategic alliance will have us jointly operating to China from Australia,” Virgin chief executive John Borghetti said on May 31.

Should the sale go ahead, Air New Zealand’s will remain a shareholder in Virgin with about about a six per cent stake.

“Options regarding the remaining shareholding will be considered by Air New Zealand in due course,” Air NZ said.

Privately held Nanshan is involved a diverse range of sectors from aluminium, finance, education, clothing and real estate. The company also owns Qingdao Airlines, an Airbus A320 operator which began flying in April 2014 and is based in the Shandong Province on China’s east coast.

Air New Zealand said Nanshan intended to support the outcome of Virgin’s capital structure review.

The review was likely to call for further fresh equity in Virgin to shore up the company’s balance sheet.

Virgin Australia said in a statement on Friday it “looked forward to meeting with Nanshan Group over the coming weeks to discuss the proposed acquisition”.

“The Group understands that Nanshan Group will put forward a nomination for a representative on the Group’s board, which the Group will consider in accordance with its corporate governance procedures and policies,” Virgin said.

At 1130 AEST on Friday, Virgin shares were up about five per cent at 29.5 cents, while Air New Zealand was up a little over four per cent at $2.15. Qantas was 1.6 per cent lower at $2.96.

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6 Comments

  • Chris

    says:

    I not sure if it has been good move by Air NZ to sell its stake in Virgin Australia unless Singapore Airlines and Etihad have given Air NZ their blessing to do so.

    The sale will see 2 Chinese investment companies, each with their own airlines, having a nearly 40% stake in Virgin Australia with Singapore Airlines and Etihard having collectively 44% with Virgin Group having 8%, Air NZ 3% and the remaining shareholding being private investors.

    I wonder if Virgin Australia will ending up being a ‘Chinese’ owned airline?

  • don

    says:

    A bad move

  • Bowcher

    says:

    Bad move by Christopher Luxon. Especially with such a loss on an asset. He has made some very questionable decisions whilst at the helm of Air NZ.

    Rob Fyfe pieced Air NZ back together and now Luxon is tearing it apart

  • Andrew Ewen

    says:

    A very smart move by Luxon. It looks as though the lessons of Ansett have been learned by NZ, if not by Borghetti.

    Virgin seems to be a bottomless money pit. No point throwing good money after bad.

    Get out now before it turns into Ansett Mark II and Air NZ cops all the blame ( again)

  • Vannus

    says:

    Virgin Australia now owned by just about everyone, EXCEPT Australians!

    Time to drop ‘Australia’ from its’ name!

  • T. D

    says:

    Do Chinese owned airlines have Velocity style points?

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