Virgin Australia scraps privatization plans, offers share buyback
On February 27, 2018, news emerged that Virgin Australia decided it will not privatize, despite its shrinking trade and share price decline, ending speculations of a buyout by its major shareholders.
Virgin Australia, the country’s second-largest airline after Qantas, raised considerations of delisting at its annual general meeting in November 2017, as the airline has been unable to recover from a years-long slump.
The carrier, which has a market value of A$2.2 billion ($1.7 billion), is controlled by four major investors which own almost all of its stock (90 percent), with no single investor having ultimate control of the carrier, Bloomberg reports.
The four major shareholders – Etihad Airways, Singapore Airlines, HNA Group, and Nanshan Group – each own about 20 percent; the fifth smaller shareholder – Virgin Group – owns 10 percent.
The carrier's chairman Elizabeth Bryan said that following discussions with its shareholders, the board had decided against privatizing, but did not disclose the reasons for this decision.
Instead of a buyout, Virgin Australia is offering a share buyback to the roughly 21,000 of Virgin's 38,000 investors whose shareholdings are worth less than A$500 ($391) of stock.
Those investors opting for a buyout will get A$0.30 ($0.23) for each share, costing the airline just A$5 million ($4 million), making up 0.2 percent of issued capital, The Sydney Morning Herald reports.
However, some analysts believe the mop up will do little to improve the carrier’s liquidity position, since the small parcels are barely traded. Questions remain about the inevitability of the airline privatizing in the future, Financial Review writes.
Virgin Australia has seen trade volume shrink to 0.626 million shares on February 27, 2018. The carrier’s share price has also steadily declined over the years, closing down 3.85 percent at A$0.26 ($0.20) on February 27, 2018, according estimates by The Wall Street Journal.
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