Virgin in Negotiations to Acquire Affinity’s 35% Stake

Virgin Australia has entered into the exclusive negotiations, to acquire the Affinity’s 35% stake, with minority shareholder Affinity Equity Partners.

Up till now nothing has been finalized, but an expected deal is likely to value the business at around $A2 billion, or around $A700 million for stake Virgin is looking to acquire.

Virgin Australia had sold the stake, for $A335 million, to Affinity in 2014, and the private equity group has this year been canvassing the exit options, that includes a potential IPO.

Under its new CEO Paul Scurrah, an agreement would be part of a turnaround plan, for the loss making airline as it competes against the deep pocketed competitor Qantas Airways Ltd in the Australian market.

Source had declined to reveal how Virgin Australia would finance the purchase. Australia’s second largest airline lacks an investment grade credit rating, and has also delayed purchase of Boeing Co 737 MAX jets as well, as it announced the plans to cut 750 jobs, to help fix its balance sheet.

In last month, Scurrah told Reuters that the Virgin did not willing to sell any more of its stake, as part of an Affinity exit plan, having earlier left the option of cutting it to as low as 51 per cent through an IPO or trade sale.

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