Australian logistics firm literally gives away 62% share in struggling low-cost carrier
Toll, which has owned a 62.7% stake in Virgin Blue since 2006, announced in mid-July it would unload 98.3% of its holding by way of a special dividend to its own shareholders. Investors will receive one Virgin Blue share for each Toll share held.
Toll had been looking to sell out since early this year but in April said weak market conditions meant it could not get the price it wanted. Toll now says the separation will give the "Virgin Blue board and management greater freedom to pursue its long-term growth ambitions".
Virgin Group will become the biggest single shareholder, with 25.5%. Its chairman, Sir Richard Branson, says the group "remains a long-term committed cornerstone shareholderand has a high degree of confidence in Virgin Blue's business model".
Virgin Blue has been under analysts' watch amid concerns about a deteriorating operating performance and over growth plans that include adding long-haul widebody aircraft operations and more regional jets to its fleet, which previously only comprised Boeing 737s. Some were particularly concerned about a possible need to issue new capital to fund the expansion. But Virgin Blue says its "balance sheet and cash reserves remain strong and based on current trading conditions the board sees no requirement for additional equity raisings in the foreseeable future".
Merrill Lynch says concern the airline will need to issue new capital "now looks to have abated". JP Morgan says the move "will significantly increase VBA's liquidity and creates more certainty over its long-term ownership".