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US private equity firm Bain Capital is set to recoup most if not all of its $700+ million cash outlay for Virgin Australia as the airline prepares for an IPO speculated to launch in the second half of this year.
Virgin’s shareholders – including Bain, the Virgin Group, and Queensland Investment Corp – will each take a share of a $730 million capital return proportionate to their stakes in the airline, or 93 per cent, five per cent, and two per cent respectively.
In an email to staff seen by The Australian Financial Review and The Australian, Virgin Australia chairman Ryan Cotton said that planning for what could be an IPO worth $3 billion or more is “well advanced” and that the company, which Bain bought from administration in 2020, is “in good shape”.
“While there is still no date set and our ultimate window of opportunity will depend on market conditions, we are hopeful this process will progress over the coming quarters, and we can return Virgin Australia to the ASX when the timing is right,” he said.
“This is largely thanks to the transformational investments made while still early in the pandemic, the strategic choices we have made together, the commitment our teams have shown, and the tremendous efforts our people have made across our special business.
“This is not to say the work is done. We still have significant transformation to deliver, but the foundations and performance of our business are now solid.”
Staff will be paid bonuses in recognition of their efforts, with frontline staff and executives in particular to receive four per cent of their salaries in bonuses, as confirmed in an email to employees from CEO Jayne Hrdlicka.
“I am delighted, on behalf of the ELT, to confirm that we will be paying full profit share bonuses this year to all eligible team members in recognition of the fantastic transformation progress and growth we have delivered together as one team over the last 12 months,” she said.
Bain is expected to retain between 50 and 60 per cent of the airline after the IPO. The investment giant paid $3.5 billion for Virgin in 2020, including both cash and debt.
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says:Whilst I am happy to see that Bain has recouped almost all if not all of it’s $700M cash outlay, but by nature I am inquisitive as to how, why etc. I recall a recent article whereby Bain was said to have secured a considerable “pre I.P.O” release management loan, considering the above announcement, why? and what was the loan for? – to pay off it’s debt? surely not. It would be fair to say that the $700M (above) would not have come from operating profits but from asset sales, eg B777-300ER’s and similar in which case one has to wonder why especially when considering the now imminent route expansions competing with far more experienced and better equipped carriers. Frankly considering the creeping delay in the I.P.O release I feel an air of concern amongst the institutional investors and a subsequent wobble in the knees of the Bain organisation. I appreciate that Bain is doing he right thing as a private company but considering how it inherited VOZ and the very obvious national Oz concerns I believe that Bain should be more open and upfront on what and where and how it is going because at the moment it is very plain that maybe VOZ won’t be able to achieve a profitable outcome of it’s planned expansions. They have to decide, are they just a domestic service provider or are they to reintroduce an international network too. If, as it would appear, the latter will be included to some extent then their current M.O. is not the fix. Whatever the outcome, Bain will be fine, it is the rest that will be left with the mess and none of us want that.