Chinese manufacturing and construction company Nanshan Group on Friday confirmed it was finalising a $300 million purchase of 20 per cent of the airline from Air New Zealand.
The ownership of Virgin has been under speculation since March when Air New Zealand said it planned to sell its 26 per cent stake.
The privately owned Nanshan Group is also a part owner of a Chinese domestic airline Qingdao Airlines, a large airport and executive jet business.
The purchase, which requires regulatory approval from the Chinese government, follows a deal 10 days ago by Chinese airline operator HNA Group to buy an initial 13 per cent shareholding in Virgin.
That deal, on May 31, involved the issue of new shares by Virgin to HNA, which diluted all existing shareholdings and allows HNA to increase its stake to 20 per cent.
Nanshan and HNA will join Singapore Airlines (20 percent), Etihad Airways (21.8 percent) and Sir Richard Branson’s UK-based Virgin Group (8.7 per cent) as major shareholders in Virgin. Air New Zealand is expected to hold about 2.5 per cent of Virgin.
“We believe Nanshan Group will be a very strong, positive and complimentary shareholder for Virgin Australia,” Air New Zealand chairman Tony Carter (pictured) said yesterday. “The sale will allow Air New Zealand to focus on its own growth opportunities, while still continuing its longstanding alliance with Virgin Australian on the trans-Tasman network.”
Nanshan will pay Air New Zealand a premium for the shares, 33¢ each, compared with Virgin’s share price before the announcement on Friday of 28¢. It is also a premium above the 30¢ a share paid by HNA Group 10 days ago.
According to aviation analyst Strategic Aviation Solutions chairman Neil Hansford, the deal is good for the Australian airline industry, including rival Qantas.
“It gives both Nanshan and HNA the ability to expand their airlines into Australia and it means Virgin and its subsidiary Tiger will be able to pick up all that extra business flying Chinese tourists to different destinations within Australia,” Mr Hansford said.
“As for Air New Zealand, they’ll be very happy with a great big wedge of money to go and spend on its own business.
“And it’s also a great result for Qantas. It means Virgin and Tiger will soak up all the low-yielding cheap travellers, leaving Qantas with increased capacity not having to deal with that low-yielding bottom end of the market,’’ he said.
“But it will be interesting to see the mechanics of the Virgin boardroom, now. You’ve got four very different business backgrounds and cultures,” Mr Hansford said.
Australian investors approved of the deal with the Virgin share price up 1¢ to 29¢ on Friday.