Bain confirms pursuit of Virgin Australia

Mike Murphy, a Sydney-based managing director with the private equity firm, said in a statement that Bain has the experience to navigate the current difficulties and help create an airline that meets the needs of Australian travelers and those who work in the tourism industry. He described the bid as a combination of Bain Capital and significant Australian money, arguing that it has “the strongest capital base of any of the bidders.”

The airline entered voluntary administration last month – with nearly A$7 billion ($4.5 billion) in debt – after travel restrictions imposed in connection with the coronavirus outbreak wiped out demand. A sale process was initiated last month. Bain is reportedly up against local GP BGH Capital and US-based Indigo Partners and Cyrus Capital Partners. Indigo is a private equity firm with experience investing in low-cost airlines, while Cyrus is a hedge fund said to have ties to Virgin Group founder Richard Branson.

Previously, Queensland Investment Corporation (QIC) was asked by its state government to explore a bail-out for VAH. The Queensland government earlier offered to contribute A$200 million to a support package conditional on federal government backing. However, Canberra refused to provide the A$1.4 billion loan requested by Virgin.

VAH was established in 2000 and listed in 2003. As of June 2019, it had a domestic fleet of 96 aircraft serving 39 destinations and an international fleet of 22 aircraft serving 15 destinations. Low-cost carrier Tigerair Australia offered flights to 12 domestic destinations on 15 planes. Revenue for the year was A$5.8 billion, up 7.5%, while the company’s net loss narrowed by 51.7% to A$315.4 million.

VAH’s most valuable asset is its Velocity frequent flyer business, which had 9.8 million members as of June 2019. Revenue from the business was A$411 million, 10.5% from 2018, while EBITDA increased from A$117.1 million to A$132.4 million. Affinity Equity Partners bought a 35% stake in Velocity in 2014 for A$336 million. This was sold back to VAH last year for A$700 million.

Bain has been investing in Australia for 20 years across its private equity and credit businesses. Previous deals in the country include the purchase of Kantar’s Australia and New Zealand market research and consulting business – part of an investment in Kantar globally – childcare services providers Camp Australia and Only About Children, Boost Juice owner Retail Zoo, and business services specialist MYOB.

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• Topics
• Australasia
• Buyouts
• Restructuring
• Australia
• Bain Capital Asia
• Transportation