Air NZ Buys Stake in Branson-Backed Virgin Blue, Cementing Australia Ties

Air New Zealand Ltd. bought a “substantial shareholding” in Richard Branson-backed Virgin Blue Holdings Ltd. to bolster ties with Australia’s second- biggest carrier.

Air NZ intends to buy as much as 14.99 percent of Virgin Blue, it said today in a statement without elaborating on the size of the stake it has already bought. It has no plans to make a takeover offer and will make another announcement before markets open tomorrow, it said.

Virgin Blue surged 10 percent in Sydney trading, giving it a market value of A$972 million ($968 million), according to Bloomberg data. Air NZ last month won approval to cooperate with the Brisbane-based carrier on flights across the Tasman Sea as it competes with Qantas Airways Ltd. and Emirates Airline.

“It gives them a level of control over Virgin,” said Will Seddon, who helps manage about $350 million at White Funds Management Pty in Sydney. A stake will “strengthen the alliance.”

Virgin Blue closed at 44 Australian cents. It has slumped 30 percent in the past year. Air NZ, New Zealand’s biggest airline, rose 0.7 percent to NZ$1.44 in Wellington. The Auckland-based carrier announced the stake purchase after markets closed.

Stake Approval

Air NZ has won approval from the Australian Foreign Investment Review Board to buy as much as 14.99 percent of Virgin Blue, it said. That should keep Virgin Blue’s foreign ownership below the statutory limit of 49 percent, it said. Branson’s Virgin Group owns 26 percent of Virgin Blue, according to the statement.

“This investment cements the emerging relationship between our two airlines,” Air NZ Chief Executive Officer Rob Fyfe said in the statement. It “demonstrates the confidence we have in Virgin Blue both as an entity and as a partner.”

Virgin Blue has been told by Air NZ about its approval from the Investment Review Board, it said in a statement.

To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net; Angus Whitley in Sydney at awhitley1@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.