x Abu Dhabi, UAEFriday 28 July 2017

Etihad will join in Virgin Australia’s $350 million share offer

Etihad Airways will increase its shareholding, but not raise its stake, in Virgin Australia as part of a $350 million fund-raising initiative by the Australian airline.

An Etihad Airways aircraft takes off from Abu Dhabi International Airport. Ben Job / Reuters
An Etihad Airways aircraft takes off from Abu Dhabi International Airport. Ben Job / Reuters

Etihad Airways will increase its shareholding, but not raise its stake in Virgin Australia as part of a US$350 million fund-raising initiative by the Australian carrier.

Virgin aims to raise the money through an entitlement offer to both institutional and retail investors.

It means the carrier will release more shares, but three of its major stakeholders – Etihad, Air New Zealand and Singapore Airlines – will each be limited to the stake already approved by regulators.

“Etihad Airways has reaffirmed its support for the strategy and management of Virgin Australia by confirming its participation in the entitlement offer,” a spokesman for Etihad said.

The spokesman said Etihad would maintain its current shareholding of 19.9 per cent.

However, the entitlement offer will take place in two stages, with Etihad among those going first, so it will temporarily hold more shares than the level already approved. The stake will rise to about 22.2 per cent, which will fall once retail investors are able to purchase shares.

“We are pleased that our major shareholders have indicated their support for the offer,” said the Virgin Australia chairman Neil Chatfield. “We believe that the support of such a strong and diverse group of leading international airlines demonstrates their confidence in our strategy

“Given their substantial shareholdings, the Virgin Australia board intends to work with the airline shareholders for future board representation with appropriate protocols… We believe that significant further benefits can be achieved from our alliances as we continue to deepen relationships with our partners.”

Etihad has also announced its longer term interest in raising its stake in Virgin.

Etihad was “committed to increase its economic exposure to Virgin Australia through a cash settled derivative pending the necessary regulatory approvals, including from [Australia’s] foreign investment review board, to increase its shareholding in Virgin Australia”, a spokesman said.

This does not give Etihad any ownership rights but it does provide the airline with certainty on the price it could pay in a possible future share purchase, a bit like fuel hedging.

gduncan@thenational.ae