14 November 2018
HNA plans to increase its stake in Virgin Australia to about 20 percent over time. Photo: Bloomberg
HNA plans to increase its stake in Virgin Australia to about 20 percent over time. Photo: Bloomberg

China’s HNA buys into Virgin Australia, plans larger stake

HNA Group agreed to buy at least 13 percent of Virgin Australia Holdings Ltd., adding to the Chinese conglomerate’s more than US$91 billion of assets worldwide.

The owner of Hainan Airlines Co. will buy about A$159 million (US$114 million) of new shares in Virgin Australia, Bloomberg reports, citing a statement from the Brisbane-based company.

HNA, which also signed a flights and code-share alliance with Virgin, plans to increase its stake to about 20 percent over time, Virgin said. 

HNA will pay 30 Australian cents apiece, the statement said. That’s 7.1 percent more than the stock’s last close in Sydney but still 46 percent less than the 55.5 cents reached in April last year.

The deal brings another major shareholder to join Air New Zealand Ltd., Etihad Airways PJSC and Singapore Airlines Ltd. on Virgin’s shareholder registry.

Currently, the trio almost equally control the airline.

Air New Zealand, the biggest investor in Virgin Australia, in March said it may sell its 26 percent stake.

That potential exit stoked speculation that Singapore Air would snap up the stake to stop an unwelcome foreign airline muscling in.

“Singapore are supportive of this arrangement,” Virgin Australia chief executive John Borghetti said in an interview.

“But clearly the way that China is growing, direct services in and out of China are very important.”

Air New Zealand isn’t represented on Virgin Australia’s board and wasn’t consulted about the HNA investment, Borghetti said.

The investment generates fresh funds for Virgin during a capital review, after Morgan Stanley said the Australian airline needs a further A$700 million in financing.

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