Bain Capital, the majority owners of Virgin Australia (VA, Brisbane International), will pocket almost all of a AUD730 million Australian dollar (USD489 million) capital return ahead of an anticipated IPO later this year. The amount is roughly equal to what the US private equity firm paid in cash when it acquired 93% of the airline in 2020.
The Australian business dailies last week quoted a leaked internal Virgin Australia email written by Chairman Ryan Cotton who said plans for a return of capital to shareholders, separate to any IPO windfalls, were "well advanced." In addition to Bain Capital, the Virgin Group owns 5% of the airline, with the remaining 2% held by the Queensland Investment Corporation.
“The IPO planning is well advanced," read the email. "While there is still no date set and our ultimate window of opportunity will depend on market conditions, we are hopeful this process will progress over the coming quarters, and we can return Virgin Australia to the ASX when the timing is right."
In February, ch-aviation reported that Virgin Australia was in talks with investment banks about securing the capital to start making repayments to its owners. Financial institutions making their underwriting pitches to the airline's board were asked to include a "dividend recapitalization" plan in their presentations. Potential underwriters on the short list were Goldman Sachs, Barrenjoey Capital Partners, UBS, Bank of America, Jeffries Group, Credit Suisse, Morgan Stanley, and Royal Bank of Canada. The Virgin Australia board ended up appointing UBS, Barrenjoey, and Goldman Sachs to underwrite and run the IPO. As part of the deal, UBS and Goldman Sachs will pony up AUD300 million (USD201 million) in loans towards the capital repayments, with the remainder coming from Virgin Australia's cash reserves.
With the shareholders now recouping their investment in Virgin Australia, the proposed IPO, which is likely to see the airline listed with a market capitalisation of approximately AUD2.5 billion (USD1.68 billion), now offers the shareholders a pure profit opportunity. Bain Capital is tipped to sell down its stake to between 50 - 60%.
On the same day as Cotton dispatched his email, Virgin Australia CEO Jayne Hrdlicka told Virgin Australia's employees that eligible staff members would be paid full profit share bonuses this year. Eligible employees will get a bonus equal to 4% of their salary next month. This comes on top of the 2% bonus paid in December 2022. "Eligible team members will have received 6% of their salary as a discretionary bonus over a two-year period,” said Hrdlicka. “Similar bonus payments will also be awarded to eligible team members in other work groups and will be communicated separately."
Meanwhile, Hrdlicka has taken several weeks of personal leave following the death of her husband. Jason Gaudin died last weekend after a long-running battle with cancer. In April, non-deal roadshow IPO lunches in Sydney and Melbourne were abruptly canceled by Virgin Australia, who cited unforeseen circumstances. However, most observers/participants were aware that it was related to a family matter among the Virgin Australia presenters.