What is Virgin Australia's strategy (post-administration)?

[Bagpuss]

We all know once listed at IPO they are selling a decent portion of their holdings & will recoup $$ in their investment.
standard PE adventure.

Every company operates in faith to be profitable. Every shareholder invest in shares to make a profit, people go to work and earn money to spend and save money (aka make a profit).

I get totally lost why everyone points fingers at Private Equity about making a profit cause it's as case of "nothing to see here".

 

[dajop]

Every company operates in faith to be profitable. Every shareholder invest in shares to make a profit, people go to work and earn money to spend and save money (aka make a profit).

I get totally lost why everyone points fingers at Private Equity about making a profit cause it's as case of "nothing to see here".

I think there's two discussion ... nothing more to be had around PE making a profit, of course that's what they're doing, you are so right.

The other discussion, which I think is fair in relation to PE, is their strategy for a particular business. Are they in it to have sustainable ongoing concern which has a strategy to make profit continually over the long term (often not), or are they in it (for the want of a better phrase) to "put lipstick on a pig", go in quickly, tart it up with whatever tricks and financial instruments they choose, and then dispose of it for a quick profit which may or may not leave the new owners with a business that can sustain profits over the long term. Both scenarios generate profit for the PE player, but may lead to different outcomes for employees and new shareholders.

 

[RooFlyer]

Every company operates in faith to be profitable. Every shareholder invest in shares to make a profit, people go to work and earn money to spend and save money (aka make a profit).

I get totally lost why everyone points fingers at Private Equity about making a profit cause it's as case of "nothing to see here".

Yes, Private Equity might be called the 'banker of last resort' because they are prepared to take on much greater risk than other sources of funds. In return, they demand a high Rate of Return. They typically slash and burn after acquisition and get as much off the balance sheet as possible before plumping up the business and sell. Typical exit time is 3 years.

I can't see that Bain has done much of the slash and burn and they have benefitted from Qantas' own slash & burn at the same time.

Are they in it to have sustainable ongoing concern which has a strategy to make profit continually over the long term (often not), or are they in it (for the want of a better phrase) to "put lipstick on a pig", go in quickly, tart it up with whatever tricks and financial instruments they choose, and then dispose of it for a quick profit which may or may not leave the new owners with a business that can sustain profits over the long term.

As mentioned, its the latter, not the former. They took the risk, they take the rewards at a time of their choosing. PE has to leave something on the table. Its up to the new buyers to assess the risk in front of them and invest accordingly.

 

[MooTime]

The other discussion, which I think is fair in relation to PE, is their strategy for a particular business. Are they in it to have sustainable ongoing concern which has a strategy to make profit continually over the long term (often not), or are they in it (for the want of a better phrase) to "put lipstick on a pig", go in quickly, tart it up with whatever tricks and financial instruments they choose, and then dispose of it for a quick profit which may or may not leave the new owners with a business that can sustain profits over the long term. Both scenarios generate profit for the PE player, but may lead to different outcomes for employees and new shareholders.

The article above says Bain will hold onto ~50% of their holdings so if that is the case then you'd hope it's just a lighter shade of lippy on the pig.

 

[Bagpuss]

The article above says Bain will hold onto ~50% of their holdings so if that is the case then you'd hope it's just a lighter shade of lippy on the pig.

To also remember other shareholders Virgin Group (5%) Queensland Investment Corporation (2%).

There's obviously scope both could increase their shareholding. But really I'd expect Bain to hold at least 51%. My guess would be

Bain Capital : 51%
Virgin Group : 10% ( 5% increase)
QIC : 2%
Qatar maybe : 37%

 

[MooTime]

To also remember other shareholders Virgin Group (5%) Queensland Investment Corporation (2%).

There's obviously scope both could increase their shareholding. But really I'd expect Bain to hold at least 51%. My guess would be

Bain Capital : 51%
Virgin Group : 10% ( 5% increase)
QIC : 2%
Qatar maybe : 37%

nothing for the pleb retail investors? A condition of IPO is that there's a certain number of shareholders, you know a few mum n dad types.

 

[HS-TQE]

To also remember other shareholders Virgin Group (5%) Queensland Investment Corporation (2%).

There's obviously scope both could increase their shareholding. But really I'd expect Bain to hold at least 51%. My guess would be

Bain Capital : 51%
Virgin Group : 10% ( 5% increase)
QIC : 2%
Qatar maybe : 37%

My guess:

Bain = 50%
Virgin Group 5%
QIC 2%
Airlines: QR: 20% / (Darkhorse) UA: 3%
Open float: 20%

IIRC, there are procedures for foreign airlines that are below 20% to go above 20% without initiating a full takeover. Hence the likes of QR, etc can only go up to 20% on their initial acquisition.

 

[RooFlyer]

nothing for the pleb retail investors? A condition of IPO is that there's a certain number of shareholders, you know a few mum n dad types.

Thsts right - In the couple of ASX floats I was involved with in the 2000s, IIRC the number was 300 or 350 'non affiliated' shareholders, each with a holding of $2K.

That’s where the underwriting stockbroker came in - to stuff their client list into the float.

 

[RooFlyer]

My guess:

Bain = 50%
Virgin Group 5%
QIC 2%
Airlines: QR: 20% / (Darkhorse) UA: 3%
Open float: 20%

IIRC, there are procedures for foreign airlines that are below 20% to go above 20% without initiating a full takeover. Hence the likes of QR, etc can only go up to 20% on their initial acquisition.

Out of that lot, what would you expect the Board split to be?

My guess, if there were 7:

Bain: Chair + 3, incl CEO
QR: 1 or 2 with some form of closer operational agreement
Virgin Group: 1
Independent: 0 or 1

 

[PERLHR]

Wow. Such perception from a brief 3 line post. Pretty off, actually.

The poster said....
winaisle said:
"That's totally fine, if we can't get better working conditions then we all go down together.

There's other airlines in Australia for you to fly with. Why not start now?"

That infers to me that I, as a fairly regular VA flyer, the poster does not care what my view is plus inferred I should stop flying VA now. Additionally clearly states well if we "don't get what we want we will all go down together."... seems quite clean cut to me....you may ofcourse read that differently although I really can't see how. Each to their own.

 

[RAM]

out of interest where do yo get the info that Bain & partners have paid out significant dividends to themselves?

The float articles in the AFR back in May detailed the dividend payouts in total and earlier articles mentioned that Bain et al had already been receiving dividends.

hardly a warranted use of "Lest we forget" so many dying for their country & you compare that to some profit share pool of $$ failure, my goodness, hold your head in shame.

Yes, many fought and too many have died for their country and the idea of a fair go for all - not just CEOs & the connected - who so often never got called up in (m)any past wars, or if they did served within Australia while their workers fought overseas. Not all, but way too many.

 

[Saab34]

Certainly is crickets on the IPO front. A October/November listing would seem unlikely they have been super quiet lately.

Perhaps Half 2 next year once inflation is trending down consistently.

 

[HS-TQE]

I would tip early Q3 2024.

Safe to say that Q3 of this year is definitely unlikely, and chances of Q4 is decreasing by the day, making a IPO "this year" seem as likely as REX's Frequent Flyer program.

 

[AustraliaPoochie]

Who would buy VA3 though?

 

[Saab34]

The public and funds would be mad to tie cash to this but that’s my own opinion generally in regards to investing in airlines. Will always be takers however, just look at how many lined up for the Velocity rights issue back in 2019.

Obviously the Qatar name had been mentioned a few times, they certainly have a large pool of other investments, I don’t know what they would actually get out of a Virgin deal, they already have close ties without throwing millions of cash it it. All I can think of is using Virgin to Doha and collaborating a bit closer. However is a big job throwing such money at a carrier just so they can operate to Doha.

Unless some other random company comes forward? I think even Toll had a stake in Virgin once.

 

[HS-TQE]

Although I can't see them being interested, you would expect the 'usual' suspects mentioned in the Murdoch/Nine MSM on the Star side, e.g "OMG SQ IS GOING TO TAEK OVAH !!1!!11!" or the occasional mention of NZ (despite the past mention of the 'battle of the egos' from the now former CEOs, e.g Luxon vs Borghetti vs Hogan).

 

[Saab34]

ANZ surely won’t touch it, they have considerable liabilities in the coming years let alone throwing heavy cash at this.

United?

 

[HS-TQE]

Apart from new current contender QR taking over from the former 'usual suspect' SQ, I'd say UA has taken over from former partner DL as the 'dark horse' in the post IPO stakes.

 

[Saab34]

I would back a DL/UA stake on the condition Virgin kicked off LAX ops again. I really do miss VA LH ops.

 

[jase05]

UA would be a good get but my preference would still be a QR buyout although I think that’s highly unlikely