Patrick Corp launches full take-over bid for Virgin
Patrick move on VB
Patrick Corp launches full take-over bid for Virgin
Just heard on the radio about this offer, apparently at $1.90 per share. Looks like another tidy profit coming Sir Dick's way.
"Patrick Corporation Limited (Patrick) announces that it intends to make, through its wholly owned subsidiary, Plzen Pty Limited, an unconditional cash offer of $1.90 per share for all of the ordinary shares in Virgin Blue Holdings Limited (Virgin Blue) that it does not already own (Offer). The Offer will be effected by way of an off-market takeover offer.
The Offer:
The Offer is an unconditional cash offer. The Offer values Virgin Blue’s entire share capital at $1,992million compared to its market value of $1,761million on 24 January 2005 before publication of speculation of an offer, and represents a premium of approximately 13% to the Virgin Blue share price at close of trading on 24 January 2005.
"We believe that the Offer realises full value for Virgin Blue shares. It is an unconditional and straight forward Offer, and provides Virgin Blue shareholders with the certainty of cash for their shares.” said Managing Director of Patrick Corporation Mr. Chris Corrigan. Mr. Corrigan will stand aside as Chairman of Virgin Blue for the period of the Offer.
Benefits to Patrick Shareholders:
“Patrick management considers that the Offer is important to Patrick shareholders because it will allow the company to take a clear majority stake in Virgin Blue.” said Mr. Corrigan.
“Patrick has the option to move to clear control by purchasing shares on market to acquire 3% of Virgin Blue each six months in accordance with the Corporations Act, without making a bid. However, Patrick believes an Offer to all shareholders at this time is more appropriate.” "Following the Offer, Patrick intends that Virgin Blue should continue to manage and develop its existing business as a passenger airline and intends to continue to conduct Virgin Blue’s commercial operations under the existing Virgin Blue brands.
Patrick considers that the value in Virgin Blue is driven by its current business model."
Funding
Patrick will fund the consideration payable under the Offer through debt facilities that have been made available to the Patrick Group by National Australia Bank Limited. This facility is sufficient to fully fund the maximum amount of the cash consideration that could be payable by Patrick under the Offer and associated costs.
Documentation
Patrick expects to lodge its bidder's statement with the Australian Securities and Investments Commission on 31 January 2005. The bidder's statement will set out additional detailed information in relation to the Offer, and will be sent to Virgin Blue shareholders approximately 2 weeks after its lodgement with ASIC.
Matters for consideration by Virgin Blue shareholders
In addition to the straightforward nature of Patrick’s unconditional cash offer, Virgin Blue shareholders may wish to consider the following:
• The Patrick group is already the registered holder of 45.4% of Virgin Blue’s issued share capital.
• This current holding effectively gives Patrick the ability to preclude any other bidder from obtaining control of Virgin Blue.
• Accordingly, Patrick considers that the likelihood of another bidder emerging is remote.
• The Virgin group and Patrick group are party to a shareholders agreement in respect of Virgin Blue. That agreement reduces the likelihood that the other Virgin Blue shareholders will receive a takeover premium, or a premium for control of Virgin Blue, from a third party because:
• under that agreement, until such time as one of them ceases to hold at least 5% of Virgin Blue’s issued share capital, they will each support the election and re-election of two of the other’s nominees to the board of Virgin Blue for so long as the nominator holds at least 15% of Virgin Blue.
• the combined shareholding of Patrick and the Virgin group is approximately 70% of Virgin Blue.
• accordingly, a third party will not be able to displace the nominees of Patrick or the Virgin group shareholders on the board of Virgin Blue at a meeting of shareholders.
Patrick has not discussed the Offer with the Virgin group."
"Patrick Corporation Limited (Patrick) announces that it intends to make, through its wholly owned subsidiary, Plzen Pty Limited, an unconditional cash offer of $1.90 per share for all of the ordinary shares in Virgin Blue Holdings Limited (Virgin Blue) that it does not already own (Offer). The Offer will be effected by way of an off-market takeover offer.
The Offer:
The Offer is an unconditional cash offer. The Offer values Virgin Blue’s entire share capital at $1,992million compared to its market value of $1,761million on 24 January 2005 before publication of speculation of an offer, and represents a premium of approximately 13% to the Virgin Blue share price at close of trading on 24 January 2005.
"We believe that the Offer realises full value for Virgin Blue shares. It is an unconditional and straight forward Offer, and provides Virgin Blue shareholders with the certainty of cash for their shares.” said Managing Director of Patrick Corporation Mr. Chris Corrigan. Mr. Corrigan will stand aside as Chairman of Virgin Blue for the period of the Offer.
Benefits to Patrick Shareholders:
“Patrick management considers that the Offer is important to Patrick shareholders because it will allow the company to take a clear majority stake in Virgin Blue.” said Mr. Corrigan.
“Patrick has the option to move to clear control by purchasing shares on market to acquire 3% of Virgin Blue each six months in accordance with the Corporations Act, without making a bid. However, Patrick believes an Offer to all shareholders at this time is more appropriate.” "Following the Offer, Patrick intends that Virgin Blue should continue to manage and develop its existing business as a passenger airline and intends to continue to conduct Virgin Blue’s commercial operations under the existing Virgin Blue brands.
Patrick considers that the value in Virgin Blue is driven by its current business model."
Funding
Patrick will fund the consideration payable under the Offer through debt facilities that have been made available to the Patrick Group by National Australia Bank Limited. This facility is sufficient to fully fund the maximum amount of the cash consideration that could be payable by Patrick under the Offer and associated costs.
Documentation
Patrick expects to lodge its bidder's statement with the Australian Securities and Investments Commission on 31 January 2005. The bidder's statement will set out additional detailed information in relation to the Offer, and will be sent to Virgin Blue shareholders approximately 2 weeks after its lodgement with ASIC.
Matters for consideration by Virgin Blue shareholders
In addition to the straightforward nature of Patrick’s unconditional cash offer, Virgin Blue shareholders may wish to consider the following:
• The Patrick group is already the registered holder of 45.4% of Virgin Blue’s issued share capital.
• This current holding effectively gives Patrick the ability to preclude any other bidder from obtaining control of Virgin Blue.
• Accordingly, Patrick considers that the likelihood of another bidder emerging is remote.
• The Virgin group and Patrick group are party to a shareholders agreement in respect of Virgin Blue. That agreement reduces the likelihood that the other Virgin Blue shareholders will receive a takeover premium, or a premium for control of Virgin Blue, from a third party because:
• under that agreement, until such time as one of them ceases to hold at least 5% of Virgin Blue’s issued share capital, they will each support the election and re-election of two of the other’s nominees to the board of Virgin Blue for so long as the nominator holds at least 15% of Virgin Blue.
• the combined shareholding of Patrick and the Virgin group is approximately 70% of Virgin Blue.
• accordingly, a third party will not be able to displace the nominees of Patrick or the Virgin group shareholders on the board of Virgin Blue at a meeting of shareholders.
Patrick has not discussed the Offer with the Virgin group."
Last edited by Sue Ridgepipe; 27th Jan 2005 at 23:10.
Thread Starter
Bloombereg advises that Patrick is offering $855m for the rest of VB. The VB share price has passed the $2 mark and rising.
Last edited by Jimmy Neutron; 27th Jan 2005 at 23:21.
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This is not all that surprising......Corrigan has been pushing the amature management aside for sometime.
Patrick corp is a much bigger company than Q and DJ put together and we all new they would only sit quiet for so long and watch the current failures of the current management.
This is Bad news for Q. Patrick are a ruthless company that really fight hard and will take to any opposition (see the transport industries they are involved in.) Wait and see a lot more new faces from well set up aviation companies coming into the fold.
Godfrey is very set against certain things as he said in Singapore this week (i.e the Virgin Pacific thing) but Corrigan knows what will bring up the shares and this is one thing, Infultrating this market.
Although Corigan is ruthless this may be a blessing in disguise for some of the current EBA's coming up too. For the Tech crew and engineers, Corrigan is more likely to listen and reward than a failed CPL holder. Although he is ruthless he can see the difference between Skilled workers and non-skilled workers (i.e FA's). and would rather give to these divisions and take/cut back on the non skilled jobs. Look at the wharfies. After that bloodbath although they are working harder now. (which was not hard if you knew their previous working hours etc) they are actually making more money now. They are just working more efficiently. Yes interesting time ahead. With a Patrick controlled company and capital that outstrips Q, DJ wont be falling anytime soon.
Patrick corp is a much bigger company than Q and DJ put together and we all new they would only sit quiet for so long and watch the current failures of the current management.
This is Bad news for Q. Patrick are a ruthless company that really fight hard and will take to any opposition (see the transport industries they are involved in.) Wait and see a lot more new faces from well set up aviation companies coming into the fold.
Godfrey is very set against certain things as he said in Singapore this week (i.e the Virgin Pacific thing) but Corrigan knows what will bring up the shares and this is one thing, Infultrating this market.
Although Corigan is ruthless this may be a blessing in disguise for some of the current EBA's coming up too. For the Tech crew and engineers, Corrigan is more likely to listen and reward than a failed CPL holder. Although he is ruthless he can see the difference between Skilled workers and non-skilled workers (i.e FA's). and would rather give to these divisions and take/cut back on the non skilled jobs. Look at the wharfies. After that bloodbath although they are working harder now. (which was not hard if you knew their previous working hours etc) they are actually making more money now. They are just working more efficiently. Yes interesting time ahead. With a Patrick controlled company and capital that outstrips Q, DJ wont be falling anytime soon.
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Fri "The Australian"
Patrick bids for Virgin
January 28, 2005
PATRICK Corp today announced it intended to make a cash offer of $1.90 per share for all of the shares in discount airline Virgin Blue Holdings that it doesn't already own.
The unconditional cash offer values Virgin Blue at $1.992 billion, compared to the airline's market value of $1.761 billion.
It would be made through Patrick Corp's wholly owned subsidiary, Plzen Pty Ltd by way of an off-market takeover offer.
Patrick already holds 45.4 per cent of Virgin Blue shares. The group said it had not discussed the offer with the Virgin group.
Patrick Corp managing director Chris Corrigan said the group decided against an alternate option of acquiring three per cent of Virgin Blue each six months without making a bid.
He said Patrick believed an offer to all shareholders at this time would be more appropriate.
"Following the offer, Patrick intends that Virgin Blue should continue to manage and develop its existing business as a passenger airline and intends to continue to conduct Virgin Blue's commercial operations under the existing Virgin Blue brands," "Patrick considers that the value in Virgin Blue is driven by its current business model."
He said the offer realises full value for Virgin Blue shares.
"It is an unconditional and straight forward offer, and provides Virgin Blue shareholders with the certainty of cash for their shares," he said.
Mr Corrigan will stand aside as chairman of Virgin Blue for the period of the offer.
Patrick said it would fully fund the offer through debt facilities through National Australia Bank. Patrick expects to lodge its bidder's statement with the Australian Securities and Investments Commission on Monday.
No other bidders likely
Patrick noted that its current holding in Virgin Blue effectively gives it the ability to preclude any other bidder from obtaining control of the airline.
"Accordingly, Patrick considers that the likelihood of another bidder emerging is remote," the company said.
The offer comes a little over a week after Virgin Blue shares dropped on a profit downgrade.
Virgin Blue slashed its annual profit forecast due to low passenger numbers in the face of intense competition from Qantas' rival budget airline Jetstar.
Virgin Blue shares last traded at $1.80 while Patrick Corp shares were at $6.14.
========================================
At 12:34 AEST DJ shares were up 24c at $2.04
=======================================
AAP
Virgin Blue shares jump after offer
January 28, 2005 - 12:49PM
Shares in Virgin Blue Holdings Ltd have jumped almost 14 per cent after ports company Patrick Corp Ltd announced a $1.992 billion takeover offer for the low cost carrier.
Patrick Corp Ltd, which already holds 45.95 per cent of Virgin Blue, is offering $1.90 per share in cash.
The offer represents a 13 per cent premium to Virgin Blue\'s closing shares of $1.68 on Tuesday.
As the stock was released from a trading halt, Virgin Blue rallied 25 cents or 13.89 per cent to $2.05.
Patrick shares fell 14 cents or 1.79 per cent to $6.03.
Analysts said Patrick was taking advantage of the fall in the share price of Virgin Blue in the last 10 days, after the airline released a profit warning.
"This is opportunistic," Shaw Stockbroking analyst Brent Mitchell said.
"We think Patrick is seeking to increase its stake, and considering the unconditional nature of the offer, is not seeking full ownership.
"But they are seeking a stronger stake over 50 per cent.
"Given the recent share price they have an opportunity to increase their stake at a fair to value price."
Patrick also faces a barrier to a full takeover in the form of British billionaire Richard Branson, whose Virgin Group holds 30 per cent of Virgin Blue.
A Virgin Blue spokeswoman said that Mr Branson had not yet been informed of the takeover.
"We haven\'t be able to reach him yet," she said.
But Mr Branson told journalists in Sydney in December that he had no intention of selling down his interest.
Patrick said it has not discussed the offer with Virgin Group.
Analysts also said Patrick, which gathers about 14 per cent of its underlying earnings from its Virgin Blue investment, might also be seeking greater influence over the airlines operations and strategic direction.
"The may be some benefits for Patrick from increased management input," an analyst at a US brokerage said.
Mr Mitchell said the transaction would also likely be earnings per share positive for Patrick going forward.
But Patrick stock was likely to suffer weakness after analysts downgraded earnings outlooks for Virgin Blue last week.
On January 19, Virgin Blue slashed its annual net profit forecast for the year to March 31.
It said profit would be 10-15 per cent down on the previous year.
That translates to a range of $135 million to $143 million, down from $158.5 million previously.
Analyst later cut their earnings outlook on the carrier and cut Patrick\'s profit estimates by about nine per cent at the same time.
Patrick said its off-market offer, which is being made through its wholly owned subsidiary Plzen Pty Ltd, realises full value for Virgin Blue shareholders.
"Patrick management considers that the offer is important to Patrick shareholders because it will allow the company to take a clear majority in Virgin Blue," managing director Chris Corrigan added.
Following the offer, Mr Corrigan said Virgin Blue would continue to manage and develop its existing business.
Patrick would also continue to conduct Virgin Blue\'s commercial operations under the existing Virgin Blue brands.
"Patrick considers that the value in Virgin Blue is driven by its current business model," Mr Corrigan said.
Mr Corrigan also said that the likelihood of another bidder emerging was remote given that between them, Virgin Group and Patrick own 70 per cent of Virgin Blue.
Under a shareholders agreement between the pair, each company supports each others nominees to the Virgin Blue board.
"A third party will not be able to displace the nominees of Patrick or the Virgin Group shareholders on the board of Virgin Blue," he said.
Tolhurst broker Marcus Padley said it was highly unlikely that Patrick wanted 100 per cent of Virgin Blue.
"Just an extra 4.7 per cent to take them over 50 per cent and give them control, in which case they will be unlikely to pay up much more than this," he said.
Patrick will lodge its bidder\'s statement on Monday.
Mr Corrigan will stand aside as chairman of Virgin Blue for the period of the offer.
At 1136 AEDT, Virgin Blue shares were up 21 cents at $2.01. Patrick was down five cents at $6.09.Qantas shares was up six cents at $3.60.
© 2005 AAP
Brought to you by
==========================================
At 1:17PM AEST DJ shares were up 27c at $2.07
==========================================
Patrick bids for Virgin
January 28, 2005
PATRICK Corp today announced it intended to make a cash offer of $1.90 per share for all of the shares in discount airline Virgin Blue Holdings that it doesn't already own.
The unconditional cash offer values Virgin Blue at $1.992 billion, compared to the airline's market value of $1.761 billion.
It would be made through Patrick Corp's wholly owned subsidiary, Plzen Pty Ltd by way of an off-market takeover offer.
Patrick already holds 45.4 per cent of Virgin Blue shares. The group said it had not discussed the offer with the Virgin group.
Patrick Corp managing director Chris Corrigan said the group decided against an alternate option of acquiring three per cent of Virgin Blue each six months without making a bid.
He said Patrick believed an offer to all shareholders at this time would be more appropriate.
"Following the offer, Patrick intends that Virgin Blue should continue to manage and develop its existing business as a passenger airline and intends to continue to conduct Virgin Blue's commercial operations under the existing Virgin Blue brands," "Patrick considers that the value in Virgin Blue is driven by its current business model."
He said the offer realises full value for Virgin Blue shares.
"It is an unconditional and straight forward offer, and provides Virgin Blue shareholders with the certainty of cash for their shares," he said.
Mr Corrigan will stand aside as chairman of Virgin Blue for the period of the offer.
Patrick said it would fully fund the offer through debt facilities through National Australia Bank. Patrick expects to lodge its bidder's statement with the Australian Securities and Investments Commission on Monday.
No other bidders likely
Patrick noted that its current holding in Virgin Blue effectively gives it the ability to preclude any other bidder from obtaining control of the airline.
"Accordingly, Patrick considers that the likelihood of another bidder emerging is remote," the company said.
The offer comes a little over a week after Virgin Blue shares dropped on a profit downgrade.
Virgin Blue slashed its annual profit forecast due to low passenger numbers in the face of intense competition from Qantas' rival budget airline Jetstar.
Virgin Blue shares last traded at $1.80 while Patrick Corp shares were at $6.14.
========================================
At 12:34 AEST DJ shares were up 24c at $2.04
=======================================
AAP
Virgin Blue shares jump after offer
January 28, 2005 - 12:49PM
Shares in Virgin Blue Holdings Ltd have jumped almost 14 per cent after ports company Patrick Corp Ltd announced a $1.992 billion takeover offer for the low cost carrier.
Patrick Corp Ltd, which already holds 45.95 per cent of Virgin Blue, is offering $1.90 per share in cash.
The offer represents a 13 per cent premium to Virgin Blue\'s closing shares of $1.68 on Tuesday.
As the stock was released from a trading halt, Virgin Blue rallied 25 cents or 13.89 per cent to $2.05.
Patrick shares fell 14 cents or 1.79 per cent to $6.03.
Analysts said Patrick was taking advantage of the fall in the share price of Virgin Blue in the last 10 days, after the airline released a profit warning.
"This is opportunistic," Shaw Stockbroking analyst Brent Mitchell said.
"We think Patrick is seeking to increase its stake, and considering the unconditional nature of the offer, is not seeking full ownership.
"But they are seeking a stronger stake over 50 per cent.
"Given the recent share price they have an opportunity to increase their stake at a fair to value price."
Patrick also faces a barrier to a full takeover in the form of British billionaire Richard Branson, whose Virgin Group holds 30 per cent of Virgin Blue.
A Virgin Blue spokeswoman said that Mr Branson had not yet been informed of the takeover.
"We haven\'t be able to reach him yet," she said.
But Mr Branson told journalists in Sydney in December that he had no intention of selling down his interest.
Patrick said it has not discussed the offer with Virgin Group.
Analysts also said Patrick, which gathers about 14 per cent of its underlying earnings from its Virgin Blue investment, might also be seeking greater influence over the airlines operations and strategic direction.
"The may be some benefits for Patrick from increased management input," an analyst at a US brokerage said.
Mr Mitchell said the transaction would also likely be earnings per share positive for Patrick going forward.
But Patrick stock was likely to suffer weakness after analysts downgraded earnings outlooks for Virgin Blue last week.
On January 19, Virgin Blue slashed its annual net profit forecast for the year to March 31.
It said profit would be 10-15 per cent down on the previous year.
That translates to a range of $135 million to $143 million, down from $158.5 million previously.
Analyst later cut their earnings outlook on the carrier and cut Patrick\'s profit estimates by about nine per cent at the same time.
Patrick said its off-market offer, which is being made through its wholly owned subsidiary Plzen Pty Ltd, realises full value for Virgin Blue shareholders.
"Patrick management considers that the offer is important to Patrick shareholders because it will allow the company to take a clear majority in Virgin Blue," managing director Chris Corrigan added.
Following the offer, Mr Corrigan said Virgin Blue would continue to manage and develop its existing business.
Patrick would also continue to conduct Virgin Blue\'s commercial operations under the existing Virgin Blue brands.
"Patrick considers that the value in Virgin Blue is driven by its current business model," Mr Corrigan said.
Mr Corrigan also said that the likelihood of another bidder emerging was remote given that between them, Virgin Group and Patrick own 70 per cent of Virgin Blue.
Under a shareholders agreement between the pair, each company supports each others nominees to the Virgin Blue board.
"A third party will not be able to displace the nominees of Patrick or the Virgin Group shareholders on the board of Virgin Blue," he said.
Tolhurst broker Marcus Padley said it was highly unlikely that Patrick wanted 100 per cent of Virgin Blue.
"Just an extra 4.7 per cent to take them over 50 per cent and give them control, in which case they will be unlikely to pay up much more than this," he said.
Patrick will lodge its bidder\'s statement on Monday.
Mr Corrigan will stand aside as chairman of Virgin Blue for the period of the offer.
At 1136 AEDT, Virgin Blue shares were up 21 cents at $2.01. Patrick was down five cents at $6.09.Qantas shares was up six cents at $3.60.
© 2005 AAP
Brought to you by
==========================================
At 1:17PM AEST DJ shares were up 27c at $2.07
==========================================
Last edited by Wirraway; 28th Jan 2005 at 01:22.
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PureRisk your maths are incorrect. Qantas are capitalised at approx 6.9 Billion whereas Patrick are 4.4 Billion & Virgin Blue are 1.9 Billion. Therefore QF is larger than the sum of the other two. Fact, not fiction.
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Full circle it seems
Only a matter of time now; a star on the nose, couple of bigger seats up the front, and wide bodies to LAX (SQ codeshare Obviously)
Only a matter of time now; a star on the nose, couple of bigger seats up the front, and wide bodies to LAX (SQ codeshare Obviously)
Last edited by BankAngle50; 28th Jan 2005 at 08:55.
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Now we are f#@*ing talking. Bring it - Virgin Pacific - Virgin Regional - Virgin Kiwi (Domestic) - Virgin Asia and the mighty Virgin Atlantic.
Branson is 100% in support of this. It was VB that was dragging the chain and prompted the bid. I would bet good money that Sir Dick does not sell down his share.
Branson is 100% in support of this. It was VB that was dragging the chain and prompted the bid. I would bet good money that Sir Dick does not sell down his share.
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Just wondering if this wasn't another VB stunt to drive up the share price. Certainly wouldn't seem to be SOP for Corrigan, although Branson and Godfrey wouldn't have a problem with any stunt likely to push up the share price or add business....
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Certainly wasnt a stunt. The letter of offer is on the ASX for everyone to read. The PAtrick board are not fly-by-wire operators who would try a stunt like this. Plus letters have been sent out to shareholders also.
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Sat "Melbourne Age"
Virgin surges after low-ball bid by Patrick
By Rod Myer and Philip Hopkins
January 29, 2005
Analysts see Patrick's bid to take over Virgin Blue as more a dash for the control levers than a true desire to take 100 per cent of the airline.
Chris Corrigan made his long-tipped move on Virgin Blue yesterday, when his Patrick group offered $1.90 a share for the 54.6 per cent of the airline it does not already own.
But investors immediately swamped the bid, pushing Virgin stock up 28 ˘ to $2.08. The market concluded that Mr Corrigan was "bottom feeding" and that the bid was aimed purely at pushing Patrick's stake above 50 per cent at a lower price than possible using on-market creep provisions.
Patrick chief Chris Corrigan himself lent weight to the "grab for 51 per cent" theory, saying: "Patrick management considers the offer is important to shareholders because it will allow the company to take a clear majority stake in Virgin Blue."
The Patrick bid values Virgin at just under $2 billion, up 5.3 per cent on Thursday's close and 13 per cent above the company's recent nadir on January 24.
But Marcus Padley, publisher of stockmarket newsletter marcustoday, says: "If they took the volume-weighted average price over the past three months, as most bidders do (189.54˘), then the bid is a 0.46 ˘ premium to that."
Mr Corrigan has stepped aside as Virgin chairman until the offer is resolved, and Virgin Blue released a statement saying it would consider details and that shareholders should "do nothing at this stage".
Citigroup transport analyst Jason Smith said Patrick's move was an attempt to gain management control at Virgin. "They don't necessarily want 100 per cent - 51 per cent will be OK. They are not looking to get the whole thing but they are confident about Virgin's long-term prospects and would like to have a say in it," he said.
The bid is essentially hostile in nature and, while the ultimate aim may be only to increase Patrick's stake by 5 per cent, some analysts say it shows an unhappiness with Virgin Blue management in the Corrigan camp.
With Virgin issuing two profit warnings in recent months and capacity in nine months growing by a whopping 47 per cent compared with only 27.5 per cent for revenue, the market, and probably Mr Corrigan, has become restive, wanting Virgin to let the market catch up with its expansion program.
"Everyone knows how Chris Corrigan operates - he likes to be in a rational market, especially if there's a duopoly," said Investors Mutual fund manager Jason Teh. "Virgin Blue has a patchy record since listing and Corrigan wants full control so he can manage it for cash flow and not directly compete with Qantas."
Mr Corrigan reassured the market that he did not plan wholesale changes at Virgin Blue. "Following the offer, Patrick intends that Virgin Blue should continue to manage and develop its existing business . . . under Virgin Blue brands," he said. "Patrick considers that the value in Virgin Blue is driven by its current business model."
Some observers say that business model may not include Virgin Blue chief Brett Godfrey, whom Mr Corrigan may force out if he gets control of the airline. Observers say the two men have different styles: Mr Corrigan is fixated on costs while Mr Godfrey's focus is marketing and growth. Now, with Virgin having overstretched itself, the cost focus is becoming more compelling.
The ultimate fate of the Patrick bid lies with Sir Richard Branson, who has turned an initial $10 million investment in the airline into $700 million, a healthy slice of which he cashed in at the time of the Virgin Blue float in December 2003. Sir Richard is unlikely to cash in his 25 per cent stake at $1.90 when he got $2.25 for the stock he sold into the float.
Sir Richard's Virgin Group said it would not comment on the offer and would wait until Patrick issued its Bidder's Statement on January 31 before deciding on a course of action.
Analysts say a price necessary to dislodge Sir Richard from the register would represent an unpalatable earnings multiple given Virgin Blue's admission last week that its profit for the year to March could be 15 per cent below last year's.
But, says Jason Teh, with a 45.4 per cent stake in Patrick's own hands, 25 per cent with Sir Richard and a shareholder agreement between the two major investors, a new bidder is unlikely to emerge.
The bid is not without its ironies. Investors such as Argo's Rob Patterson are unhappy with Patrick going further into the volatile airline industry even if it is supposedly to shore up its position. And analysts say it would be odd if Mr Godfrey rejected the offer, having sold 5 million of his 33 million Virgin stake for that amount in December.
Patrick shares rose 1˘ to $6.15 yesterday.
Rod Myer holds Qantas shares.
===========================================
Virgin surges after low-ball bid by Patrick
By Rod Myer and Philip Hopkins
January 29, 2005
Analysts see Patrick's bid to take over Virgin Blue as more a dash for the control levers than a true desire to take 100 per cent of the airline.
Chris Corrigan made his long-tipped move on Virgin Blue yesterday, when his Patrick group offered $1.90 a share for the 54.6 per cent of the airline it does not already own.
But investors immediately swamped the bid, pushing Virgin stock up 28 ˘ to $2.08. The market concluded that Mr Corrigan was "bottom feeding" and that the bid was aimed purely at pushing Patrick's stake above 50 per cent at a lower price than possible using on-market creep provisions.
Patrick chief Chris Corrigan himself lent weight to the "grab for 51 per cent" theory, saying: "Patrick management considers the offer is important to shareholders because it will allow the company to take a clear majority stake in Virgin Blue."
The Patrick bid values Virgin at just under $2 billion, up 5.3 per cent on Thursday's close and 13 per cent above the company's recent nadir on January 24.
But Marcus Padley, publisher of stockmarket newsletter marcustoday, says: "If they took the volume-weighted average price over the past three months, as most bidders do (189.54˘), then the bid is a 0.46 ˘ premium to that."
Mr Corrigan has stepped aside as Virgin chairman until the offer is resolved, and Virgin Blue released a statement saying it would consider details and that shareholders should "do nothing at this stage".
Citigroup transport analyst Jason Smith said Patrick's move was an attempt to gain management control at Virgin. "They don't necessarily want 100 per cent - 51 per cent will be OK. They are not looking to get the whole thing but they are confident about Virgin's long-term prospects and would like to have a say in it," he said.
The bid is essentially hostile in nature and, while the ultimate aim may be only to increase Patrick's stake by 5 per cent, some analysts say it shows an unhappiness with Virgin Blue management in the Corrigan camp.
With Virgin issuing two profit warnings in recent months and capacity in nine months growing by a whopping 47 per cent compared with only 27.5 per cent for revenue, the market, and probably Mr Corrigan, has become restive, wanting Virgin to let the market catch up with its expansion program.
"Everyone knows how Chris Corrigan operates - he likes to be in a rational market, especially if there's a duopoly," said Investors Mutual fund manager Jason Teh. "Virgin Blue has a patchy record since listing and Corrigan wants full control so he can manage it for cash flow and not directly compete with Qantas."
Mr Corrigan reassured the market that he did not plan wholesale changes at Virgin Blue. "Following the offer, Patrick intends that Virgin Blue should continue to manage and develop its existing business . . . under Virgin Blue brands," he said. "Patrick considers that the value in Virgin Blue is driven by its current business model."
Some observers say that business model may not include Virgin Blue chief Brett Godfrey, whom Mr Corrigan may force out if he gets control of the airline. Observers say the two men have different styles: Mr Corrigan is fixated on costs while Mr Godfrey's focus is marketing and growth. Now, with Virgin having overstretched itself, the cost focus is becoming more compelling.
The ultimate fate of the Patrick bid lies with Sir Richard Branson, who has turned an initial $10 million investment in the airline into $700 million, a healthy slice of which he cashed in at the time of the Virgin Blue float in December 2003. Sir Richard is unlikely to cash in his 25 per cent stake at $1.90 when he got $2.25 for the stock he sold into the float.
Sir Richard's Virgin Group said it would not comment on the offer and would wait until Patrick issued its Bidder's Statement on January 31 before deciding on a course of action.
Analysts say a price necessary to dislodge Sir Richard from the register would represent an unpalatable earnings multiple given Virgin Blue's admission last week that its profit for the year to March could be 15 per cent below last year's.
But, says Jason Teh, with a 45.4 per cent stake in Patrick's own hands, 25 per cent with Sir Richard and a shareholder agreement between the two major investors, a new bidder is unlikely to emerge.
The bid is not without its ironies. Investors such as Argo's Rob Patterson are unhappy with Patrick going further into the volatile airline industry even if it is supposedly to shore up its position. And analysts say it would be odd if Mr Godfrey rejected the offer, having sold 5 million of his 33 million Virgin stake for that amount in December.
Patrick shares rose 1˘ to $6.15 yesterday.
Rod Myer holds Qantas shares.
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Join Date: Feb 2002
Location: Sydney, Australia
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Well, at least Mr Corrigan is shrewd enough to see that Godfrey is just not up to the task.
You can see the tension between them whenever they are on the same podium at a press conference.
Chris Corrigan's body language says it all.
You can see the tension between them whenever they are on the same podium at a press conference.
Chris Corrigan's body language says it all.