Mon "Melbourne Age"
Branson counterattacks Patrick bid
By Scott Rochfort
Sydney
January 31, 2005
Sir Richard's privately owned Virgin Group announced it had bought 5.1 million shares in Virgin Blue on the same day Patrick made its $1.90-a-share offer, taking the billionaire's stake from 24.6 per cent to 25.1.
Virgin Blue shares have already climbed above Patrick's offer on Friday, rising from $1.80 to $2.08, with Virgin Group declaring the airline "has much greater value than that indicated in the price being offered by Patrick Corporation".
But the Virgin founder remained vague on whether he intended to keep his stake if Patrick produced a higher bid.
"I am extremely proud of the Virgin Blue business and the great team of people who have brought real competition . . . to the Australian people," he said in a statement.
Patrick spokesman Paul White said: "We're unsure of Virgin Group's objectives."
Citing the restrictions that prevent substantial shareholders increasing their shareholdings by more than 3 per cent every six months unless they make a full takeover bid, Mr White said: "Patrick is offering to buy all of the shares that it currently doesn't own in Virgin Blue, which makes us the only realistic bidder."
Patrick says the $1.90-a-share offer "realises full value" given that it values Virgin Blue at a 13 per cent premium to its closing price of $1.80 a share on Thursday night.
Yet most analysts have labelled Patrick's bid as opportunistic, given it comes a little over a week after Virgin Blue issued its second profit warning this fiscal year.
The airline's shares were trading around $2 prior to the warning. Credit Suisse First Boston, which co-managed the Virgin Blue float, has a valuation of $2.35.
Analysts believe Patrick's bid is not designed to give the transport group full ownership of Virgin Blue but rather, lift Patrick's 45.4 per cent stake above 50 per cent to give it control of the board and the airline's direction.
Amid rumours in recent months of Mr Corrigan's disapproval of some members of the airline's management team, the Patrick Bidder's Statement said the transport group intended to "work with Virgin management to determine how best to further develop Virgin Blue's business, reduce operating costs, and otherwise maximise the operating performance".
It is unclear if this will affect Virgin Blue's plans to start up a low-cost airline in Macau or the airline's plans to establish a carrier that could service the Australia-US route.
Goldman Sachs JBWere said the takeover bid "signals that Patrick is concerned that Virgin Blue may dilute the value of its domestic franchise (via) expansion into offshore aviation markets or new business ventures."
Virgin Blue chief executive Brett Godfrey has kept silent since the bid, fuelling speculation he would leave the airline.
Yet Patrick said it planned to "continue the employment of Virgin Blue's present employees" and not to "make any major changes" if it gains control of the airline.
Patrick's own share price has taken a battering from the two recent Virgin Blue downgrades, giving Mr Corrigan more reason to gain board control.
After hitting an all-time high of $6.88 before the Virgin Blue downgrade, Patrick shares last traded at $6.15.
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Mon "Melbourne Age"
Singapore has \'no plans\' for Virgin Blue
By Scott Rochfort
Sydney
January 31, 2005
Singapore Airlines has dismissed speculation it will play any role in Patrick Corporation\'s $1.1 billion bid for Virgin Blue Holdings.
After scuttling plans to enter the Australian domestic market, Qantas\' vocal overseas opponent said it had no plans to buy into Virgin Blue.
Highlighting the recent sale of its remaining 6.3 per cent stake in Air New Zealand as an example, the airline said it no longer had an interest in investing in non-core businesses.
"At this stage, Singapore has no intention or no plans to purchase any part of Virgin Blue," airline spokeswoman Samantha Stewart said.
"It\'s an interesting development. We\'re watching it very closely," she said.
A report in London\'s The Daily Telegraph said Patrick held talks with Singapore before making the offer. It is unclear what possible deal could be struck between Singapore and Virgin Blue (or Patrick), despite one source close to Patrick labelling the media report as "bull****".
One theory suggests Patrick could be keen to sound out the long-term risks of Virgin Blue\'s tentative plans to establish an airline to fly the lucrative Australia-US route.
The possibility of Singapore entering the route if it gains approval from the Australian Government could seriously hurt the profitability of the route, which is only serviced by Qantas and United Airlines.
There is speculation talks between Patrick and Singapore would focus on the airline establishing an "interline" agreement with Virgin Blue.
Such a deal with Singapore - the foreign airline with the most flights into Australia - would give Virgin Blue a handy slice of inbound international feed traffic, which makes up around one-sixth of the domestic market.
A stumbling block is Virgin Blue\'s rudimentary IT system, which restricts the airline\'s IT and booking systems from linking up with the systems of international airlines.
As for capturing a larger slice of the higher-yielding corporate market, Virgin Blue is reportedly close to finalising plans for its own frequent-flyer scheme.
It is unclear if Virgin Blue has any plans to link its frequent-flyer scheme with any international airlines, such as its so-called sister carrier, Virgin Atlantic.
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Mon "The Australian"
Branson rejects Corrigan bid
Andrew Trounson
January 31, 2005
BRITISH billionaire Richard Branson is not about to stand by and let his mate Chris Corrigan buy on the cheap a greater slice of their Virgin Blue airline without a fight, yesterday dismissing Patrick Corporation\'s $1.1 billion bid as too low.
Sir Richard has put his money where his mouth is, raising his own stake in the cut-price airline by another half a percentage point to 25.1 per cent.
Sir Richard\'s Virgin Group paid $10.1 million to snap up 5.1 million Virgin Blue shares on Friday, the same day Mr Corrigan\'s transport giant Patrick launched its $1.90-a-share offer.
Sir Richard paid an average $2.04 a share and his move will lend support to Virgin Blue shares which on Friday soared 16 per cent to $2.08 on the news of Patrick\'s bid.
"It is Virgin Group\'s view that Virgin Blue Holdings has much greater value than that indicated in the price being offered by Patrick Corp," Virgin Group said in a statement.
"The airline has been a remarkable success in the Australian market, building a strong reputation for outstanding customer service at a competitive price whilst maintaining low operational costs."
But Sir Richard has a job ahead of him if he is to stop Patrick taking 50 per cent-plus control of Virgin Blue, which is managed by a confidant of Sir Richard, Brett Godfrey.
Without itself launching a rival full takeover bid, Virgin Group is limited by Australia\'s "creep" provisions to buying no more than an additional 3 per cent of Virgin Blue every six months.
Patrick already has 45.95 per cent and Mr Corrigan appears to be only bidding what he thinks will be enough to take him over 50 per cent.
The bid has sparked speculation that in the face of new discount competition from Qantas offshoot Jetstar, Mr Corrigan is concerned Virgin Blue has expanded too aggressively, despite its success in moving fast to fill the void left by the collapse of Ansett. Virgin Blue now has about a third of the domestic market.
However, Patrick already has de facto control of the eight-member Virgin Blue board with three appointees and a Patrick-appointed independent in David Mortimer.
The Virgin Blue board is to meet on Wednesday in Brisbane when Mr Godfrey is expected to present new business initiatives. High on the agenda for Virgin Blue is taking on Qantas by grabbing a greater slice of the corporate market. There are strong rumours Virgin Blue is planning to launch a frequent flyer scheme later this year.
For now the market is telling Mr Corrigan that if he wants more he will need to pay more. Certainly, those shareholders who paid $2.25 a share to climb aboard when co-founders Patrick and Virgin floated the company in 2003 will be unimpressed by the offer.
"The fact that Virgin Group has been buying on market – and given the current trading price – indicates that they are unlikely to get control," BT Group portfolio manager Misha Collins said.
In a statement, Sir Richard said: "I am extremely proud of the Virgin Blue business and the great team of people who have brought real competition, genuine value and friendly air travel to the Australian people."
A Patrick spokesman said: "We are unsure of Virgin Group\'s objectives as they are only entitled to buy a further 3 per cent of the company."
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