The Boston-based American private investment firm, Bain Capital, is looking to relist airline Virgin Australia (the largest airline by fleet size to use the Virgin brand), in a move that would come as the domestic aviation market country’s domestic aviation market improves from pandemic lows.
The listing of Virgin Australia, one of Australia’s largest airlines would probably be one of Australia’s largest initial public offerings (IPOs) in 2023 after capital markets activity plummeted in 2022 amid international financial market uncertainty.
Bain Capital’s plan regarding the listing
Bain is evaluating how to best position the airline for continued growth and long-term success. It is also planning on retaining a substantial shareholding in a future IPO of Virgin Australia. Regarding this, Bain has recently sent a request for proposals on the listing to investment banks and expects to make appointments within a month.
Bain has also said it would seek guidance on the best timing and structure to return the airline to the Australian Securities Exchange but added that no rulings had been made as to if and when that would happen.
Reunion Capital involvement
Boutique firm Reunion Capital, the Sydney-based financial advisory firm that offers services in the areas of initial public offers, equity capital, and secondary share sales, has been assigned as a financial advisor on the deal and will supervise the appointment of investment banks to lead the IPO but Reunion Capital has declined comment on any appointment.
Bain Capital’s stake in the deal
The size of the stake that Bain Capital should retain is one of the questions banks pitching for a role in the IPO will be asked to attend to in terms of forecasting how large the demand for the deal could be. Bain hasn’t commented on that point.
The acquisition of Virgin Australia by Bain Capitals
By 2020, Virgin had registered seven annual losses in a row even before the pandemic ruined travel globally. And all the efforts to turn the airline around were often impeded by a board that included representatives from five foreign investors.
The board, which includes airlines that controlled over 90% of the company, was unwilling to inject new capital at the start of the pandemic, as their businesses also suffered.
So the airline was placed under voluntary administration and Bain bought it for A$3.5 billion ($2.45 billion) including liabilities.
The turnaround for Virgin
Presently, aviation market conditions have improved significantly, and regarding this, Australia’s state and international borders have reopened.
Virgin is back to full strength as it has rebuilt its Boeing 737 fleet to basically the same size it was before the pandemic and closed its previously money-losing global and budget divisions.
The idea surrounding the potential listing of Virgin sprung up as Qantas (the flag carrier of Australia and the world’s third-oldest airline still in operation) is poised to post a first-half underlying profit of A$1.35 billion to A$1.45 billion in this coming month, a sharp turnaround from last year’s underlying loss before tax of A$1.28 billion.
With aim of helping growing companies reach their full potential, Bain Capital’s plans for Virgin Australia are definitely going to improve the airline in the long run.
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