Toll to offload Virgin Blue stake

[NM]

TOLL Holdings has announced plans to offload its stake in Virgin Blue Holdings, via a special dividend scheme.

Toll will pay an 'in specie dividend', which means Toll shareholders will get one Virgin Blue share for every Toll share they own.

Toll is currently the airline's largest shareholder, with a 62 per cent stake. Toll reiterated today that it never intended to be a long term investor in Virgin Blue, after inheriting the stake from the takeover of stevedore Patrick.

See the full story here.

 

[oz_mark]

One way to offload your shares

 

[Evan]

Can't sell it, just give it away, thats almost the way it reads, a 1.3 billion writedown and they value those shares at 330 million !
Ouch, i wonder if they see it really looking bad and possible loss of $$ very soon.
E

 

[Mal]

Bad new for Virgin too. Having a huge number of small shareholders is extremely costly (mailouts of required information, direct crediting of dividends, management of shareholders etc). Presume it will be very shortly followed by either a share buyback or an organised on-market small parcel sale.

Still, good for Toll that they can get arid of something they never really wanted...

 

[ANstar]

I think this is good for Virgin. They can finally move on from Toll.

I think Toll have been pretty stupid with Dj in the past 12 months and should have sold when they had offers! Now who has pie on their face....

I wonder if we will see another airline show some interest in DJ? They are still in decent shape compared to most airlines and seem to have a bit of cash in the bank.

 

[codash1099]

At current prices, Branson could be a buyer - it would average down his per share cost considerably.

If he doesn't act, what message does that send (unless of course he has his hands full with airline problems elsewhere)?

 

[clifford]

At current prices, Branson could be a buyer - it would average down his per share cost considerably.

If he doesn't act, what message does that send (unless of course he has his hands full with airline problems elsewhere)?

Branson won't be a buyer. Why should he be? He's a businessman.

 

[kamchatsky]

Branson won't be a buyer. Why should he be? He's a businessman.

Why wouldn't he buy it? He always had the passion to do it. He sold part of the business for $2.25 on the float and now he can buy it for like 50 cents. It is almost like 75% off ...... If he can start the airline with Ansett Qantas and Impulse I am sure he think it would have a chance now ...... Especially with shares being so cheap ...... Good businessman always buy value (see Warren Buffett) and I think there is value to it.

 

[pauly7]

Why wouldn't he buy it? He always had the passion to do it. He sold part of the business for $2.25 on the float and now he can buy it for like 50 cents. It is almost like 75% off ...... If he can start the airline with Ansett Qantas and Impulse I am sure he think it would have a chance now ...... Especially with shares being so cheap ...... Good businessman always buy value (see Warren Buffett) and I think there is value to it.

I agree, I think Branson will come sniffing.

At the end of the day, if this goes ahead of course, Virgin will become a sitting duck for takeover targets - anyone with some cash (SIA? Emirates? although they have previously rejected DJ earlier this year, Lion?).

I maintain my opinion that a takeover by another airline is the best thing that can happen to DJ, to take the next step they need proper alliances and integration into a company that wants to grow the business sustainably (not get chucked around like a hot potato!)

And also once Toll is out the backdoor, nothing really to stop QF picking up Toll!

 

[dajop]

At the end of the day, if this goes ahead of course, Virgin will become a sitting duck for takeover targets - anyone with some cash (SIA? Emirates? although they have previously rejected DJ earlier this year, Lion?).

Air NZ?

No they've learnt their lesson ... I hope. Hmm replace Toll with the words TNT and you can draw some parallels. All we need now is DJ to make a bid for ZL ......

Nevertheless, I'm sure DJ's cost structure is much much better than its one time foe and therefore it has a much better chance of succeeding. Let's hope it is picked up by someone interested in running an airline rather than looking for a good source of cash flow.

 

[kamchatsky]

Easy, Temasak Holdings buys like 49% of the company, and put it as part of *A, and get all the connection flights for all overseas travellers on LH, NZ, SQ, TG, OZ, UA .... Everyone in FF forum would be happy.

Then merge Tiger and Virgin Blue together and VB goes upmarket to fight QF and let Tiger to fight against JQ. There will be few overlap routes this way domestically and internationally (V Australia on long distance and Pacific Blue/Asia becomes Tiger ....). Include tiger flexible fare to earn Velocity points ...... ie just like Qantas/Jetstar arrangement .......

 

[dajop]

Interesting today, the ASX200 dropped 2.2%, yet Virgin Blue shares increased in value 11.4%. Somebody must have liked this. I guess though it is from a low base .... still only 23% of their 12 month high.

 

[reg]

Branson will buy. Didn't something similar happen in the 80's when another savvy businessman (Australia's richest) sold channel 9 to a not so savvy businessman and then bought it back when the price dropped considerably!

 

[brissyflyer]

Interesting today, the ASX200 dropped 2.2%, yet Virgin Blue shares increased in value 11.4%. Somebody must have liked this. I guess though it is from a low base .... still only 23% of their 12 month high.

1.1 million shares changed hands today.

I would think that confirming the profit forecast probably helped as well.

I also noticed in an article that Brett Godfrey has pretty much confirmed some sort of checked baggage charge.

Peter

 

[pauly7]

Easy, Temasak Holdings buys like 49% of the company, and put it as part of *A, and get all the connection flights for all overseas travellers on LH, NZ, SQ, TG, OZ, UA .... Everyone in FF forum would be happy.

Then merge Tiger and Virgin Blue together and VB goes upmarket to fight QF and let Tiger to fight against JQ. There will be few overlap routes this way domestically and internationally (V Australia on long distance and Pacific Blue/Asia becomes Tiger ....). Include tiger flexible fare to earn Velocity points ...... ie just like Qantas/Jetstar arrangement .......

You are pretty much describing my dream solution for DJ!!

I think DJ need a 'SIA' to really show them how to deal with premium/high value PAX. And I think DJ would excel in operating an ultra LCC to combat JQ. Star Alliance... hell yea!

Interestingly, GD commented that in Q1 09, QF is projected to reach DJ's costbase which is a huge risk for DJ because QF are able to charge a decent premium (=profit) and DJ have injected cost into their business without realising a margin improvement (a wishy washy entertainment system and lack lustre premium Y).

 

[thegurio]

And come sniffing he did. I think he made a good choice, not only does he know his stuff starting up before but he also has a base of customers and with some cash injection/smart thinking he could snaffle some over from QF and others. I would imagine that if they could move more in line with QF etc. they would quite happily get more to move over. The biggest problem is the perception of DJ and that wont change in a hurry or at all. Which is also probably the biggest problem, lets face it, you've made it when you are sitting up the pointy end of the plane, have your shiny platinum coloured card and are sitting on the Rude Roo...

 

[kamchatsky]

You are pretty much describing my dream solution for DJ!!

I think DJ need a 'SIA' to really show them how to deal with premium/high value PAX. And I think DJ would excel in operating an ultra LCC to combat JQ. Star Alliance... hell yea!

Interestingly, GD commented that in Q1 09, QF is projected to reach DJ's costbase which is a huge risk for DJ because QF are able to charge a decent premium (=profit) and DJ have injected cost into their business without realising a margin improvement (a wishy washy entertainment system and lack lustre premium Y).

Think about it, Brett Godfrey was talking about developing ULCC within Virgin Blue some time ago. If they merge then this problem would be resolved immediately. Another positive thing is that DJ can move all low margin business to Tiger like what Qantas do to Jetstar and focus on high margin business instead.

Also this would also reduce competition which is what both Qantas and VB wants.

But what is the chance this will happen?! Very low at the moment ......

 

[JohnK]

Can't sell it, just give it away, thats almost the way it reads, a 1.3 billion writedown and they value those shares at 330 million !
Ouch, i wonder if they see it really looking bad and possible loss of $$ very soon.

Why give the shares away? What is it going to cost them to hang on their shareholding in Virgin Blue and try to sell it slowly on the stock market? Surely Virgin Blue shares are traded on a daily basis.

And Richard Branson is still not interested?

 

[Evan]

Why give the shares away? What is it going to cost them to hang on their shareholding in Virgin Blue and try to sell it slowly on the stock market? Surely Virgin Blue shares are traded on a daily basis.

And Richard Branson is still not interested?

I would guess because they really do see some losses in the near future before they can off-load them. That would be my guess, otherwise as you say why not just sell them on-market.
To me this method of offload points to DJ looking like being in trouble.

But who knows companys do strange things and its not always for the reasons you would assume.

E

 

[dajop]

I would guess because they really do see some losses in the near future before they can off-load them. That would be my guess, otherwise as you say why not just sell them on-market.
To me this method of offload points to DJ looking like being in trouble.

Some anecdotal evidence of the challenges faced by DJ and why Toll may be concerned ....

I flew MEL-SYD yesterday afternoon. I chose DJ, their fares were around $250-$300 cheaper than QF during same period ($150-$200 vs $450 on QF) for that sector, one way flight. Same this afternoon, QF are either have full planes or charging full Y ($450) between 3:30pm and 8pm. By contrast DJ fares range between $149 and $245 (only one flight at this price).

To me QF seem to be continuing to extract significant premiums out of the corporate market that DJ can't. And Geoff Dixon is constantly telling everyone how tough it is at the moment ... if it's tough for QF, it must be a lot tougher for DJ who can't extract these sort of premiums. Therefore Toll may have valid concerns.