By Scott Murdoch
(Reuters) -Virgin Australia is set to return to the stock market after a five-year absence, with the Bain Capital-owned airline launching a A$685 million ($443 million) initial public offering on Wednesday amid a rebound in domestic tourism.
The offering, Australia’s largest for the year so far, will see Bain’s stake drop to 39.4% from about 70%, while Qatar Airways, which recently bought into the airline, will retain a 23% holding, according to a deal term sheet seen by Reuters.
It’s one of the most closely watched deals in Australia in years as a successful listing will be seen as a vote of confidence in prospects for a solid recovery in the nation’s consumer spending.
The shares will offered at a fixed price of A$2.90 per share, the term sheet showed, valuing the company at A$2.32 billion on a fully diluted basis.
Bain, which bought Virgin for A$3.5 billion including liabilities, declined to comment on the deal details outlined in the term sheet.
The U.S. private equity company acquired the airline in 2020 after it went into voluntary administration, hit hard by COVID-induced travel restrictions.
AUSPICIOUS START
Prospects look good for a successful IPO.
Investors lodged indicative bids for Virgin before book building began that would cover the size of the deal, a bookrunner’s message sent on Wednesday showed.
Domestic travel demand is also recovering, helped by two recent interest rate cuts. That in turn has contributed to shares in rival Qantas trading at a record high. Australia’s ASX200 is also trading close to an all-time peak reached in February.
As part of its revival efforts over the last few years, Virgin pared back its international business. But it is due to resume long-haul flights through its partnership with state-owned Qatar. The two airlines are planning 28 new weekly return services between Doha and major Australian airports.
In March, 5.1 million passengers were carried on domestic commercial airlines in Australia, official figures show. That’s a slight dip on last year but more than a four-fold increase from the peak of COVID in mid-2021.
“Ongoing strong local demand, slow overall capacity growth and reduced competition in the domestic market have also benefited the revived Virgin Australia,” said Simon Elsegood, head of research at CAPA Centre for Aviation.
He noted that the failures of rivals Bonza and REX in the mainline jet market have only benefited Virgin and Qantas.
Virgin has a domestic market share of 34.4% as of March, not far behind Qantas which had 37.5%, according to an Australian Competition and Consumer Commission report.