Wed "Herald Sun"
Fund kings want more of Virgin
Olga Galacho
03dec03
OFFSHORE institutions are believed to be pressuring Virgin Group to release more shares into the bookbuild that gets underway today for the float of its cut-price airline Virgin Blue.
Virgin Blue said yesterday its parent company might consider increasing the shares it sells as part of the IPO, but would not make a final decision until the weekend.
Communications chief David Huttner said yesterday Virgin Blue was satisfied with the outcome of the retail offering, which closed on Friday.
In a statement yesterday, Virgin Group said it might release up to 4 per cent of the 29.1 per cent stake it originally intended to retain in Virgin Blue.
It said it was considering increasing the size of the offer to institutions because of the "strong response to the retail offering, considerable interest from Australian and international investors, and investor requests for greater liquidity".
Patrick Corporation, which jointly owns Virgin Blue with Virgin Group, intends to keep a 45 per cent interest in the listed airline.
Combined with Virgin's anticipated original stake of 29.1 per cent, this means less than 26 per cent of Virgin Blue stock is being offered.
Only about 15.5 per cent of that will be available to institutions.
An unnamed source said the airline wanted to woo a number of overseas institutions on to the register, but they were reluctant to invest unless greater liquidity was created.
While Mr Huttner would only confirm that institutions both here and overseas were eager to see more stock freed up, it's believed key US investors are behind the push.
"We won't make the call until we see the book and all will be confirmed by Monday, when the shares start trading," Mr Huttner said.
"There are worse problems you can have than no one wanting to sell your stock and everyone wanting to buy it," he said.
If Virgin's stake is sold down to 25.1 per cent, the free float of the company will increase to 29 per cent, or about $612 million at the mid-point of the indicative price range.
The airline will sell between 281 million and 312 million shares at between $1.80 and $2.25 a share, with the final price to be determined at the end of the bookbuild on Friday.
In other news yesterday, an upbeat outlook from Qantas about its planned no-frills airline, Jetstar, helped to push the carrier's shares up 2 per cent to $3.41.
Jetstar is designed to challenge Virgin Blue's 30 per cent market share and Qantas claims it will run from a cheaper cost base than its rival.
===========================================