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UPDATE 11am: Virgin Australia’s administrator has officially confirmed Bain Capital has won the bidding war to acquire the airline, after a dramatic morning of announcements.
The successful US investor later said it would set up an employee ownership and profit-sharing scheme and was “committed to protecting as many Virgin Australia jobs as possible”.
The formal announcement came at 11am after its only approved rival, Cyrus Capital Partners, withdrew its proposal early on Friday morning and fired a broadside at administrator Deloitte.
Bain’s winning bid will now be put to creditors in August, who will vote to confirm the deal. It’s still unknown what role the state of Queensland will play, or whether the bondholders will attempt to wrestle back control after launching a coup earlier this week.
Bain also appeared to hint it would retain the Virgin branding, by repeatedly referring to “Virgin Australia” in its correspondence to Australian Aviation.
Administrator Vaughan Strawbridge said the deal “supports the current management team led by [chief executive Paul] Scurrah and their improvement plan for the airline”, suggesting the current top team may remain in place.
Scurrah is also known to be close to Virgin Australia grandee Sir Richard Branson.
Strawbridge said, “Bain Capital has presented a strong and compelling bid for the business that will secure the future of Australia’s second airline, thousands of employees and their families and ensure Australia continues to enjoy the benefits of a competitive aviation sector.”
And in a separate statement to the ASX, Virgin Australia said, “No return to shareholders is anticipated. At this stage, it is not possible to determine the estimated return to creditors however an update will be provided ahead of the second meeting of creditors.”
The announcement came after a morning of high drama that saw rivals Cyrus make a dramatic attempt to seize back control by withdrawing and slamming Deloitte.
In a strongly-worded statement, the US investor said it was pulling out due to a “lack of engagement” with administrator Deloitte, which had “not returned calls, emails or meaningfully engaged”.
Cyrus founder Stephen Freidheim said, “I am disappointed that it has become necessary to withdraw our offer.
“Despite the material improvements put forward, the administrators have still not engaged with Cyrus on its offer.” It later offered to re-enter talks if conditions were to improve.
It is unknown how this development will affect the group of bondholders, who dramatically broke cover earlier this week to announce they were submitting a proposal. The conglomerate has been linked to Virgin Blue founder Rob Sherrard.
Neil M Hansford
says:The Cyrus drop out is merely saving face. Full and Final means exactly that and after Monday the Administrator ethically shouldn’t talk to a bidder whilst they are considering bids.
You forget the bondholders who don’t have to play the game according to Strawbridge under Australian Company law as they are a special class of creditor.
They are now the most qualified bidder.
After this farce Deloitte have nil credibility in conducting an administration of this type and it is time for a serious partners meeting.
AgentGerko
says:If the Cyrus comments are genuine, it doesn’t say a lot about the efforts of Deloittes to truly find the best buyer.
Hein Vandenbergh
says:Deloitte’s fees are with a Bain agreement. As usual, consultancy and audit work together in cahoots. No-one is ever really concerned about shareholder or creditor wellbeing – it’s their own which counts. Anyway, Bain will cop a hit: VA will not be here by mid-2023. Wonder what will happen with my almost half a million FF points… That’s after losing 1.5 million in the demise of also grossly mismanaged Ansett. Terrible that being a good, well-managed and resilient airline seems to go hand in hand with rubbish passenger experience. Likely says something about the flawed economic model on which airlines operate. Anyway, not much travel in the pipeline, so I cannot get too shirty about it, except reiterate the flaws in that industry. An essential service? Yes, but on a quantum different scale.
Rosemary Sutherland
says:Actually Hein it didn’t go with a “rubbish” passenger experience. With all those FF points you are probably in the business or do a lot of first class travel. Its the Qantas experience that is so disappointing and class orientated. In Virgin I was always welcomed – we all were. In Qantas, unless you are a company member, male and first class you get treated like the name they give economy – “cattle class”. I will never forget the Qantas Air Hostess coming up to a Captain across the isle from me doing the commute to South Korea. She apologised to him for not being able to get him a seat in first class. Good grief – he’s an employee.
Rosemary Sutherland
says:Just re- reading your comment Hein you probably did mean Qantas not Virgin but I can’t delete or edit. 🙂
Martin I Clementson
says:Let’s be honest; Virgin is a foreign airline. Many don’t really love QF, but with it’s FF system, we have little choice. Being based in Brisbane doesn’t help, and one doubts Virgin can ever make a profit.
Rocket
says:They could have made a profit and did until they were taken over and run by a person who was more interested in using shareholders’ money on obscene follies like ‘The Club’ and other things which wasted millions hand over fist. Off he goes into the sunset with millions and millions in the bank for driving the airline into the ground AND of course, not without the arrogance of it being someone else’s fault… anyone who was there and knows anything about how airlines should be run was aghast at how the stupidity one individual displays can destroy an entire company.
Paul
says:Flybe is not a very good reference for Cyrus.
Time to keep the Branson influence to a minimum.
Rod Pickin
says:“Bain”, I suggest you keep the champers on ice as I aint sure it’s over just yet.
Adam Thorn
says:Rod, you may well be right! I suspect there’s a few more twists left in this one.
Adam
Edward
says:Deloitte’s & Strawbridge’s mishandling of the whole Vol Admin process, is breathtaking.
Obviously, as first-timers’ handling an airline collapse, they were way out of their depth.
I agree with Rod, above, this isn’t over.
There’s still much time between now & August.
Mr John E Brett
says:I don’t really understand why Virgin Australia being based in Brisbane, has any real relevance in relation to Bain Capital’s wish to acquire the Airline?
The fact that the airline hasn’t turned a profit for many years is no different to a number of other bigger airlines, such as Qantas for instance! ???
Faraday
says:QANTAS has had multi-billion $ PROFITS for the last six years’.
Where have you been? Under a rock?
jay
says:I know a bidder who has contacted Deloitte several times and still has not received a reply. Same treatment, no calls returned, no email reply. Deloitte is corrupt.
Mac Carter
says:Why would having Virgin based in Brisbane be a disadvantage?
Hopefully Virgin will be profitable at some time in the future.
Restructure of the business and a new management team might be in order.
Sas
says:Let’s not more about the poor shareholders but let us ensure the administrators pocket as much fees as they can by prolonging the bidding process.
Paul Robson
says:First Korda Mentha line their pockets from the Ansett collapse, and now Deloitte will do so as well with the VA. Administration!
Agree with several of the comments above, it ain’t over yet……..if one recalls the Tesna deal with Ansett!
Edward
says:Paul, at least KordaMentha knew what they were doing.