The opportunistic acquisition saw the airline increase its shareholding at 29.7c per share through an equity derivative agreement with Deutsche Bank worth up to $32.8 million.
It is understood Air NZ has yet to seek board representation as part of the deal, but it is expected to do so. It has no immediate intention of taking its stake further and is not in talks with Virgin Group, which has a 25.6 per cent share in the Australian carrier.
"Our increased investment in Virgin Australia continues Air New Zealand's strategy to develop scale and reach in this region," Air NZ chief executive Rob Fyfe said.
"The trans-Tasman Alliance with Virgin Australia was the first step in this strategy, followed by our initial investment in January of this year. This increased investment demonstrates our continued belief in the strategy that Virgin Australia is pursuing and our confidence in the Virgin Australia management team to deliver this strategy."
Rec Coverage 28 Day pass
Mr Fyfe was upbeat at the carrier's results announcement about its market-beating performance on the Tasman and expectations of the alliance with Virgin. He said the alliance was now well under way "and delivering great results for customers and also for both airlines".
"Our combined share in the trans-Tasman market has grown significantly year on year," Mr Fyfe said. "As we noted at the time of our original investment, our stake in Virgin Australia also provides us with an interest in the No 2 airline in Australia and, through this, access to opportunities in the growing Australian domestic market. Air New Zealand has no intention to enter the Australian domestic market in its own right.
"The recent weakness in Virgin Australia's share price provided us with an opportunity to gain further exposure to Virgin Australia at an attractive price, reducing our average cost of entry from 44c per share to approximately 40c per share."
The equity derivative agreement with Deutsche Bank gives Air NZ an economic interest in up to 5 per cent of Virgin Australia, subject to certain conditions, including not breaching the foreign ownership cap.
Air NZ is guaranteed a minimum exposure of an additional 3.5 per cent stake, worth $23m, up to the maximum additional exposure of 5 per cent. Foreign ownership in Virgin now tops 48 per cent and Air NZ said it would begin talks with Virgin Australia to convert the derivatives to physical shares "as soon as possible within the constraints of the foreign ownership cap".
Once completed, the deal will see Virgin Group and Air NZ with more than 45 per cent of the company.
All Aviation NEWS
By
Maani Sharma [ MBA Aviation ]
Manager Aviation NEWS Project
www.All-Aviation-NEWS.in
www.AeroSoftCorp.com
www.AeroSoft.in
www.AeroSoft.co.in
www.AeroSoftseo.com
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It is understood Air NZ has yet to seek board representation as part of the deal, but it is expected to do so. It has no immediate intention of taking its stake further and is not in talks with Virgin Group, which has a 25.6 per cent share in the Australian carrier.
"Our increased investment in Virgin Australia continues Air New Zealand's strategy to develop scale and reach in this region," Air NZ chief executive Rob Fyfe said.
"The trans-Tasman Alliance with Virgin Australia was the first step in this strategy, followed by our initial investment in January of this year. This increased investment demonstrates our continued belief in the strategy that Virgin Australia is pursuing and our confidence in the Virgin Australia management team to deliver this strategy."
Rec Coverage 28 Day pass
Mr Fyfe was upbeat at the carrier's results announcement about its market-beating performance on the Tasman and expectations of the alliance with Virgin. He said the alliance was now well under way "and delivering great results for customers and also for both airlines".
"Our combined share in the trans-Tasman market has grown significantly year on year," Mr Fyfe said. "As we noted at the time of our original investment, our stake in Virgin Australia also provides us with an interest in the No 2 airline in Australia and, through this, access to opportunities in the growing Australian domestic market. Air New Zealand has no intention to enter the Australian domestic market in its own right.
"The recent weakness in Virgin Australia's share price provided us with an opportunity to gain further exposure to Virgin Australia at an attractive price, reducing our average cost of entry from 44c per share to approximately 40c per share."
The equity derivative agreement with Deutsche Bank gives Air NZ an economic interest in up to 5 per cent of Virgin Australia, subject to certain conditions, including not breaching the foreign ownership cap.
Air NZ is guaranteed a minimum exposure of an additional 3.5 per cent stake, worth $23m, up to the maximum additional exposure of 5 per cent. Foreign ownership in Virgin now tops 48 per cent and Air NZ said it would begin talks with Virgin Australia to convert the derivatives to physical shares "as soon as possible within the constraints of the foreign ownership cap".
Once completed, the deal will see Virgin Group and Air NZ with more than 45 per cent of the company.
All Aviation NEWS
By
Maani Sharma [ MBA Aviation ]
Manager Aviation NEWS Project
www.All-Aviation-NEWS.in
www.AeroSoftCorp.com
www.AeroSoft.in
www.AeroSoft.co.in
www.AeroSoftseo.com
On-Line Assistance:
Gtok: maani.aerosoft@gmail.com
Y!Messenger: maani.aerosoft@yahoo.com
Rediff: maani.aerosoft@rediffmail.com
MSN: maani.aerosoft@hotmail.com
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