Air NZ to sell bulk of Virgin stake to Chinese conglomerate

The sale was subject to regulatory approval from Chinese authorities.

“We believe Nanshan Group will be a very strong, positive and complimentary shareholder for Virgin Australia,” Air New Zealand chairman Tony Carter said.

“The sale will allow Air New Zealand to focus on its own growth opportunities, while still continuing its long-standing alliance with Virgin Australia on the trans-Tasman network.”

Air New Zealand flagged its intention to sell down its 26 per cent stake in Virgin on March 30. On the same day, its chief executive Christopher Luxon also resigned as a Virgin board member.

The proposed transaction adds another major shareholder to an already crowded Virgin share register that already includes Singapore Airlines, Etihad Airways and Sir Richard Branson’s UK-based Virgin Group.

Further, Virgin announced on May 31 the parent company of Hainan Airlines, HNA Group, would take an initial 13 per cent equity stake in the Australian company for A$159 million, or A$0.30 a share, through the issuing of new shares.

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The deal also included a commercial partnership between the two parties, with Virgin planning to begin flights to Hong Kong and Beijing from a yet-to-be-disclosed Australian city by mid-2017.

“This strategic alliance will have us jointly operating to China from Australia,” Virgin chief executive John Borghetti said on May 31.

Should the sale go ahead, Air New Zealand’s will remain a shareholder in Virgin with about about a six per cent stake.

“Options regarding the remaining shareholding will be considered by Air New Zealand in due course,” Air NZ said.

Privately held Nanshan is involved a diverse range of sectors from aluminium, finance, education, clothing and real estate. The company also owns Qingdao Airlines, an Airbus A320 operator which began flying in April 2014 and is based in the Shandong Province on China’s east coast.

Air New Zealand said Nanshan intended to support the outcome of Virgin’s capital structure review.

The review was likely to call for further fresh equity in Virgin to shore up the company’s balance sheet.

Virgin Australia said in a statement on Friday it “looked forward to meeting with Nanshan Group over the coming weeks to discuss the proposed acquisition”.

“The Group understands that Nanshan Group will put forward a nomination for a representative on the Group’s board, which the Group will consider in accordance with its corporate governance procedures and policies,” Virgin said.

At 1130 AEST on Friday, Virgin shares were up about five per cent at 29.5 cents, while Air New Zealand was up a little over four per cent at $2.15. Qantas was 1.6 per cent lower at $2.96.