Patrick deal boost for Virgin Blue
SYDNEY, Australia (CNN) -- Competition in Australia's aviation market has received a boost with a decision by logistics company Patrick Corp to buy a 50 percent stake in discount airline Virgin Blue.
Patrick Corp, run by Chris Corrigan, will pay $135 million for the half share of Virgin Blue, a subsidiary of British businessman Sir Richard Branson's Virgin Group.
The injections of funds should help Virgin cement its position as the main competition to dominant Australian carrier Qantas in the domestic market, as well as pursue opportunities to develop international routes.
The company has in the past shown an interest in competing with Qantas and Air New Zealand in the lucrative trans-Tasman route between Australia and New Zealand, as well as in New Zealand's monopolistic domestic market.
The deal is not unexpected, with Patrick Corp and Virgin Blue working together closely in the past.
The two companies last year launched an unsuccessful joint bid to buy collapsed Australian airline Ansett Airlines from its receivers.
Virgin Blue currently holds about 15 percent of the Australian domestic aviation market following the failure of Ansett's receivers to sell that airline -- formerly the number 2 player -- to a consortium of Melbourne-based businessmen last month.
The fresh funds will allow Virgin Blue to take advantage of the forced sell-off of Ansett assets and compete more vigorously for former Ansett business.
In a joint statement released Tuesday, Patrick Corp said it would most likely pay for the stake using a combination of new capital and existing shares, but that the final capital requirements had yet to be determined.
"A further consideration may be payable dependent upon the performance of the company over the next three years," the statement said.
The deal will also require approval by Patrick Corp's shareholders.
Patrick Corp stock was steady at Aust. $15.70 a share at noon on the Australian Stock Exchange Tuesday, while Qantas stock was sold down A18c, or 4 percent, to Aust. $4.33 on the threat of enhanced competition from Virgin Blue.
Branson, who will be chairman of Virgin Blue, said Patrick Corp was the ideal partner for the airline in Australia.
"I have a great deal of respect for both Chris Corrigan and the company which has been one of the most innovative in the Asia Pacific region," he said.
"They clearly bring a very strong transport and logistics expertise into the business, and a business reputation that is second to none," he said.
Corrigan said Virgin Blue had changed the face of Australian aviation by bringing a friendly, efficient and low-cost service to the Australian public.
Virgin Blue currently operates 16 aircraft with a further seven scheduled for delivery during 2002.
The company employs about 1,500 people and flies to all Australian States and Territories.
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