Flight International online news 13:00GMT: Virgin Blue’s majority owner, Patrick Corporation, has formally rejected a takeover offer from rival transportation conglomerate Toll Holdings that would lead to its stake in the Australian carrier being sharply reduced.

Patrick says in a statement today: “Toll’s proposed break-up of Patrick’s controlling interest in Virgin Blue destroys significant value.”

Toll announced on 22 August its intention to buy Patrick by offering Patrick shareholders 0.4 Toll shares, A$0.75 in cash (57 US cents) and 0.3 Virgin Blue shares for every Patrick share.

It also said it would sell 15% of Virgin Blue to the public through a share offer underwritten by Virgin Group and issue call options to Virgin Group for up to 15% of Virgin Blue. As a result, Patrick’s 62.4% stake in Virgin Blue would be reduced to around 10%.

Toll has said it wants to reduce Patrick’s exposure to the airline business but still maintain a relationship with Virgin Blue so the two may work together to develop the airfreight market.

Toll’s late-August announcement came just four days after Virgin Blue announced to the Australian stock exchange that it had downgraded its net profit forecast to A$90-100 million for the fiscal year to 30 September as a result of high fuel prices.

But today Brisbane-based Virgin Blue issued a revised forecast saying it now expects its fiscal year profit to be “in the order of A$105” million.

The airline’s top spokeswoman in Brisbane says “the lift in the forecast…is attributed to results coming through from a range of cost savings initiatives introduced 12 months ago plus a marginal, very marginal increase in yield”.

She adds: “As part of the financial process we have our auditors in now…[and] as a listed company we have disclosure obligations [so] once we understand a significant variance in forecast profit we must advise the market”.

While Patrick wants to retain Virgin Blue it also says Toll’s offer should be rejected on the grounds that it is “highly conditional and uncertain”.

Patrick says shareholders would be selling their Patrick shares for shares in Toll Holdings, a company with lower earnings growth, plus there are “concerns about Toll’s underlying earnings and the sustainability of its current trading multiple”.

It concludes that Toll Holdings’ offer undervalues Patrick shares and “does not represent fair value for Patrick”.

Patrick is a diversified transportation group. Apart from its controlling stake in Virgin Blue its assets include stevedoring businesses at major Australian ports and a large stake in Australia’s national rail system.

Source: Flight International

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