Bain Capital to buy Virgin Australia in a bold bet on the recovery prospects of a shattered travel industry
- Bain Capital was announced as the winning bidder for Virgin Australia, according to the carrier’s administrator Deloitte, without disclosing the purchase price
- It was the sole suitor for Virgin Australia after Cyrus Capital Partners withdrew its takeover proposal hours earlier, citing ‘lack of engagement’ by Deloitte
Bain Capital will buy collapsed Virgin Australia Holdings in one of the biggest single bets on the airline industry since it was shattered by the coronavirus pandemic.
The carrier’s administrator Deloitte named the US private equity firm as the winning bidder in a statement Friday. Bain was left as the sole suitor after Cyrus Capital Partners withdrew its takeover proposal hours earlier. Deloitte didn’t disclose the purchase price.
Bain’s investment is a bold bet on a sector facing its biggest ever crisis and the Virgin Australia business itself. The airline’s larger rival Qantas Airways on Thursday depicted a bleak outlook, sacking 6,000 workers, grounding about 100 planes and raising A$1.9 billion (US$1.3 billion).
While domestic travel is slowing recovering, Australia’s government has said the country could keep its borders largely closed until 2021.
Virgin Australia collapsed in April under A$6.8 billion in debt as the outbreak halted global travel. Deloitte’s decision ends an auction process that initially drew interest from more than 20 parties.
Deloitte had said that Bain’s business plan envisioned operating a “smaller, single-branded domestic and short-haul international airline that also has growth potential.”
The announcement followed a fiery attack on the same process from Cyrus, which said Friday it was withdrawing its bid due to a “lack of engagement” by Deloitte since the US investment group submitted its proposal on June 22.
Bain’s deal faces a further challenge from Virgin Australia’s bondholders who this week submitted their own plan to swap their debt for new shares under an independent board.
Even before coronavirus-related restrictions nearly froze revenue, Virgin Australia had lost money for seven consecutive years.
In April, Prime Minister Scott Morrison’s government refused to give the airline even A$200 million to survive, tipping Virgin Australia in alongside UK carrier FlyBe as one of the world’s highest-profile corporate casualties from coronavirus.
