Australia's Patrick Corporation has successfully completed its attempt to take control of Virgin Blue.
Patrick's bid, launched in late January, appeared in March to be failing several weeks before it was set to close. But a warning over Virgin Blue's possible profit fall next year caused the share market price to drop below Patrick's offer. Independent investors then started selling, despite advice from Virgin's board that its shares were worth more. When Patrick's offer closed on 1 April, it had increased its share ownership from 45.4% to 62.42%.
Neither the Virgin Group nor chief executive Brett Godfrey sold any shares to Patrick. As a result of other shareholders selling out, however, Virgin Blue's free float is now less than 10%. The Virgin Group, with 25%, remains the second largest shareholder.
Godfrey, one of the airline's founders, has agreed to stay on as chief executive for another two years, despite speculation that he would leave because his management style differs from that of Chris Corrigan, Patrick's managing director. Corrigan publicly praises Godfrey for deciding to stay, saying that they both "have a shared vision for the airline".
Sir Richard Branson is also mending fences with Patrick. Tensions between the two reached a peak during the takeover when Branson's Virgin Group tried but failed to force Patrick to raise its offer. When Virgin Blue's board then urged shareholders to reject Patrick's bid as "opportunistically timed" and too low, Corrigan dismissed the board's price estimate as "ludicrous". But now, Branson says "it's fantastic to have somebody of Chris's calibre as chairman", and he predicts that Patrick and his Virgin Group will provide "good balance" for the airline.
Aside from taking over as Virgin Blue's chairman, Corrigan has announced no other changes in the airline's structure. Analysts have suggested that he might enlarge the board of directors, but his company already enjoys a majority.
Patrick has also given few signals about how its control might alter the airline's course. In his first staff memo, Corrigan says: "The anti-climax of this communication is that there are no dramatic changes contemplated."
What seems most clear is that Virgin Blue will continue its recent focus on improving yields. In March it introduced premium seating at the front of its single-class aircraft, plus more flexible fares and lounge access aimed at business travellers. Branson also foreshadowed on a recent visit to Sydney that Virgin Blue will soon introduce a frequent flyer plan.
DAVID KNIBB BRISBANE
Source: Airline Business
