Singapore Air raises Virgin stake amid ownership speculation

Bloomberg

Singapore Airlines Ltd. raised its stake in Virgin Australia Holdings Ltd. a week after future ownership of the A$1.3 billion ($987 million) airline was put in doubt.
The Singapore carrier increased the shareholding to 23.11 percent from 22.91 percent, it said in a statement. The airline said it paid A$3.18 million to settle a series of equity swaps, or 46.7 Australian cents on average for each Virgin Australia share.
Speculation about Virgin Australia’s ownership mounted last week after the airline’s largest shareholder, Air New Zealand Ltd., said it’s considering an exit. While the latest purchase barely changes Singapore Air’s stake, it’s paying 32 percent more than Virgin Australia’s last closing price for the additional shares.
“If one wanted to draw a ‘loose’ conclusion from last night’s announcement, it’s that Singapore Air does not seem to have objections to injecting further cash into Virgin,” Citigroup Inc.’s credit trading desk in Sydney said in a note to clients.
Virgin gained 2.1 percent to 36.25 Australian cents at 1:33 p.m. in Sydney trading.
Singapore Air has approval from Australia’s Foreign Investment Review Board to increase its stake in Virgin Australia to 25.9 percent. The Singapore carrier declined to comment beyond Wednesday’s statement, it said in an e-mail.
Virgin Australia Holdings Ltd.’s largest shareholder, Air New Zealand Ltd. had on March 30 said it’s considering selling some or all of its stake in the airline, a stake currently valued at around A$345 million ($263 million).
Air New Zealand will assess other uses for the capital tied up in Virgin Australia, the Auckland-based carrier said in a statement Wednesday. Air New Zealand Chief Executive Officer Christopher Luxon resigned from Virgin Australia’s board with immediate effect.
“Air New Zealand does not want a large minority equity position in Virgin Australia as it focuses on its own growth opportunities,” it said in the statement. Air New Zealand owns 25.89 percent of Virgin Australia, according to data compiled by Bloomberg.
Etihad Airways PJSC owns around 24 percent and Singapore Airlines Ltd. has about 23 percent stake, the data show. Virgin Australia shares were halted in Sydney for the announcement.
Etihad Airways PJSC owns about 24 percent of Virgin Australia, making it the second-largest shareholder, while Virgin Group owns about 10 percent, according to data compiled by Bloomberg.
Virgin Australia borrowed A$425 million from its major shareholders last month, giving the airline time to review its balance sheet. Singapore Airlines Limited is the flag carrier of Singapore with its hub at Singapore Changi Airport.
The Singapore Airlines group includes many airline-related subsidiaries: SIA Engineering Company handles maintenance, repair and overhaul (MRO) business across nine countries, with a portfolio of 27 joint ventures, including with Boeing and Rolls-Royce.
Singapore Airlines Cargo operate SIA’s freighter fleet and manages the cargo-hold capacity in SIA’s passenger aircraft. It has three airlines subsidiaries: SilkAir operates regional flights to secondary cities, while Scoot and Tigerair operate in the low-cost carrier sector.