Sun, May 18, 2003 - Page 11 News List

Virgin Blue may sell public stake

BLOOMBERG , ADELAIDE, AUSTRALIA

Richard Branson said annual profit more than tripled at Virgin Blue Airlines, the UK billionaire's Australian carrier, and he wants a 30 percent stake to be offered the public by November.

Virgin Blue, which had a A$110 million profit (US$71 million) in the year to March 31, should sell new shares representing 20 percent of its equity, Branson said in an interview. The balance of the stock should come from his Virgin Group Ltd and partner Patrick Corp.

Branson said the outlook for Virgin Blue is positive because its flights in Australia have been shielded from the outbreak of SARS in Asia. Qantas Airways Ltd, Australia's biggest carrier, has cut services and fired staff to help it cope with a slump in travel demand caused by the outbreak.

"The domestic travel market is slowing somewhat but will continue to grow," George Clapham, who oversees the equivalent of US$48 million at ABN Amro Asset Management, said before the profit announcement.

Virgin Blue's profit in the year to March 31 rose to A$110 million (US$71 million) from A$35 million a year earlier. Pretax profit this year increased to A$158 million from A$47 million a year earlier, the company said.

"Most things are in place," for the offering which will happen before November, Branson said.

Branson said Virgin Group and Patrick haven't agreed on final details for the share sale. The two partners can't agree on whether the agreement made last year when Virgin Group sold Patrick a 50 percent stake for A$260 million allows for the carrier to sell new shares, Branson said.

Patrick has agreed to sell as much as 5 percent stake and doesn't want Virgin Blue to sell new stock. Branson doesn't want its share diluted and is arguing the carrier needs to sell new stock to ensure there are enough publicly traded shares to attract investors, he said.

"We have no plans to get ourselves into a position where we could lose control" of the airline, Branson said. "Certainly we have no interest in selling out."

Also, Patrick will have to pay between A$200 million and A$300 million more to Virgin Group, Branson said.

Patrick earlier agreed to pay more should the airline's value be higher at the time of an share sale.

The payment will be determined at the time of the offering and will be about A$30 million for every A$100 million by which the implied market value of Virgin Blue is more than A$600 million, Patrick said earlier this week.

"We have the slightly strange situation where one partner wants the lowest price possible and the other partner wants a reasonable price, not a high price," said Branson, who described the relationship between Virgin Group and Patrick as excellent.

In an interview earlier this week, Branson said he would like to see shares of Virgin Blue trading on the Australian Stock Exchange by November. Goldman Sachs Group Inc and Credit Suisse First Boston will "most likely" manage the share sale, Branson said.

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