Virgin Australia, owned by Bain Capital, is making a comeback to the stock market with a A$685 million ($443 million) initial public offering. This move comes after a five-year absence and signals a positive outlook for domestic tourism in Australia.
The IPO, which is the largest in Australia so far this year, will see Bain Capital’s stake in the airline drop to 39.4% from about 70%. Qatar Airways, which recently acquired a 23% holding in Virgin Australia, will retain its stake, according to a deal term sheet obtained by Reuters.
This offering is being closely watched in Australia as it is seen as a vote of confidence in the nation’s consumer spending and overall economic recovery. The shares will be offered at a fixed price of A$2.90 per share, valuing the company at A$2.32 billion on a fully diluted basis.
Bain Capital acquired Virgin Australia in 2020 after the airline went into voluntary administration due to the impact of COVID-induced travel restrictions. The U.S. private equity company bought the airline for A$3.5 billion, including liabilities.
The prospects for a successful IPO look promising, with investors already showing interest in Virgin Australia before the book building process began. Domestic travel demand is on the rise, supported by recent interest rate cuts, which has also led to rival Qantas’ shares trading at a record high.
Virgin Australia has made efforts to revive its business in recent years by focusing on its domestic operations and reducing its international footprint. The airline is set to resume long-haul flights through its partnership with Qatar Airways, with plans for 28 new weekly return services between Doha and major Australian airports.
In March, 5.1 million passengers were carried on domestic commercial airlines in Australia, indicating a significant increase from the peak of COVID in mid-2021. Virgin Australia currently holds a domestic market share of 34.4%, just behind Qantas which has a 37.5% market share, according to the Australian Competition and Consumer Commission.
The IPO process for Virgin Australia involves a front-end book-building process, allowing institutional investors to lodge their bids for shares until Thursday. The stock is expected to start trading on June 24. This IPO will be the largest in Australia since DigiCo Infrastructure REIT raised A$2 billion in December.
Overall, the return of Virgin Australia to the stock market signals a positive outlook for the airline industry in Australia and reflects the growing confidence in the nation’s economic recovery post-pandemic.
