Virgin Group is stepping up efforts to raise cash for its grounded airlines, announcing it will sell a stake worth about $500m in its space tourism business and launch meetings with potential private investors.
In an announcement in New York on Monday, Richard Branson’s holding company said it would look to sell up to 25m shares in Virgin Galactic to or through Credit Suisse, to redirect cash to Virgin Atlantic, Virgin Australia and its other struggling businesses.
Shares in the space venture have doubled from last year’s IPO price of $10 to $20.18 at the end of trading last Friday, making it one of the most valuable assets in Sir Richard’s portfolio. The stake he is now putting up for sale is valued at just over $500m.
Shares in the space venture have doubled from last year’s IPO price of $10 to $20.18 at the end of trading last Friday, making it one of the most valuable assets in Sir Richard’s portfolio. The Financial Times disclosed last week that a securities filing 10 days ago had cleared the path for Sir Richard to sell up to half of his holding in Virgin Galactic. The stake he is now putting up for sale represents under a quarter of the total and is valued at just over $500m.
Virgin Investments owns 80.7 per cent of Vieco 10, the vehicle selling the stake, with the remainder held by Aabar, the Abu Dhabi investment fund, so a successful placing of the shares could raise more than $400m for Sir Richard’s other businesses. Virgin Group’s two airlines — Virgin Atlantic and Virgin Australia — have been hardest hit by the Covid-19 pandemic, but his newer hotel and cruise ship businesses are also suffering.
Virgin Atlantic is also pushing forward with plans to obtain private investment, in a move that could reduce the 51 per cent stake held by Sir Richard. Delta Air Lines owns the minority stake.
The airline’s management is on Monday starting three days of presentations to a dozen private investors who have expressed interest.
One person briefed on the discussions said the company was hoping to have a deal agreed by the end of next week. Private equity groups, sovereign wealth funds and hedge funds are among those involved in the talks.
Virgin Atlantic has asked the UK government for £500m of support for the Heathrow-based airline. Two people briefed on the matter said the airline was seeking more than this figure from private investors.
Apollo Global Management is among the groups considering an investment, according to these people, although they cautioned that there was no certainty it would invest.
The US private equity group bought the Minnesota-based budget airline Sun Country Airlines in 2017 and expressed interest in Thomas Cook’s German airline Condor before it was sold to Polish carrier LOT this year.
Greybull, which owned the failed Monarch Airlines, Cerberus and Centerbridge have also signalled interest in Virgin Atlantic.
The Financial Times previously revealed that the airline had hired investment bank Houlihan Lokey to look at private funding options after the UK government rejected its initial submission for £500m of state aid, unimpressed by the group’s failure to first seek investment elsewhere.
“Everything is up for discussion,” said one of the people close to the talks, noting that the airline could obtain funding from several investors. The investment bank had carried out an “intense” search for new investors, said another person close to the talks.
Virgin Atlantic is hoping its move to cut more than 3,000 jobs last week, representing about a third of its workforce, will help show the UK government and private sector that it has a viable medium-term business plan.
Its discussions with the UK government continue but it is now focusing on its search for private investment. The airline is optimistic that it can obtain some form of public-private partnership.
In its statement on Monday, Virgin Group said it intended to use the proceeds of the Galactic stake sale “to support its portfolio of global leisure, holiday and travel businesses that have been affected by the unprecedented impact of Covid-19”.
Virgin Australia, in which Virgin Group had a 10 per cent stake, has collapsed into voluntary administration.