Virgin Australia welcomes Singapore Airlines as investor
BUSINESSDESK: Virgin Australia, which competes with Qantas Airways in the Australian aviation market, will place 10% of its shares with Singapore Airlines for $A105 million, using most of the funds to buy a 60% stake in Tiger Airways and all of Skywest Airlines.
The deals will lift Virgin Australia's fleet to 139 from 108 and add 10 new destinations in Western Australia and allow the airline to re-enter the budget leisure market with Tiger.
The transactions will strengthen the airline as it battles Qantas at home and abroad. Singapore Airlines will join Etihad and Air New Zealand as shareholders.
Virgin Australia will issue 245.6 million shares to Singapore Airlines at an issue price of 42.88 cents apiece. It will acquire a two-thirds stake in Tiger Airways Australia, with Tiger Airways Holdings retaining 40%, for an upfront payment of $A35 million and an extra $A5 million if certain performance targets are met.
The two partners will invest a further $A62.5 million in the business to expand its operations.
Virgin Australia also agreed to acquire 100% of Skywest at 45 Australian cents a share, made up of 22.5 cents in cash and 0.53 new Virgin shares for every Skywest share. The upfront cash paid would be $A47 million.
Virgin Australia will have $A23 million in proceeds left over from the Singapore Airlines placement. The Tiger and Skywest deals are scheduled for completion by the fourth quarter of 2013.
Tiger Airways Holdings is one-third owned by Singapore Airlines.
Virgin Australia shares last traded at 46 Australian cents on the ASX and have gained 61% this year. Singapore Airlines was last at $S10.54, down 5% this year. Qantas last traded at A$1.34 and has fallen 7.9% this year.