Air New Zealand Case Study
Releasing a turbulent trans-Tasman investment with Air New Zealand.
‘A great example of managing a time-sensitive process, and leveraging our international network to achieve a high-value outcome for our client under incredibly challenging circumstances.’
Sam Ricketts, Managing Director, Head of Investment Banking
In early 2016, Air New Zealand asked Jarden for advice on its continued investment in Star-Alliance partner airline, Virgin Australia.
The premise was that Air New Zealand’s 26 percent equity investment in Virgin was no longer core and the capital would be better deployed in other areas. The objective was to exit the investment in a timely manner while minimising execution risk, maximising value, and maintaining the long-standing relationship between the airlines.
What started out as a scoping exercise quickly evolved, when Virgin unexpectedly called upon Air New Zealand and other major shareholders for a new A$425 million unsecured loan facility. Virgin was facing a liquidity crisis, and major shareholders had no choice but to provide the loan or risk seeing the value of their investment significantly impaired.
‘When Virgin Australia announced its capital structure review in early 2016, the market began to view a transformational recapitalisation as imminent,’ Sam recalls. ‘Our priority was to preserve the value of our client’s investment whilst ensuring that it did not have to inject any further capital into a non-core investment. A timely divestment was critical, and in order for Air New Zealand to be better placed to fully evaluate its options, we recommended it disclose its intentions to the market as soon as possible.’
On 31 March 2016, Air New Zealand announced to the market the review of its investment in Virgin Australia. From that point on, Jarden was managing a time-sensitive process.
With the support of Credit Suisse (Jarden’s global alliance partner), Jarden engaged a targeted list of buyers, successfully drawing competitive bids and driving pricing tension in very challenging circumstances. Through leveraging its global network, Jarden was also able to identify a previously unknown high-value buyer – Chinese-owned Nanshan Group.
‘Despite all of the challenges thrown at us, including an unexpected placement of shares by Virgin to rival Chinese party HNA, we were successful in executing the divestment to Nanshan Group before Air New Zealand was required to participate in Virgin Australia’s material A$852 million rights issue. Not only that, we achieved a sale price for Air New Zealand’s stake at a 10 percent premium to the price at which Virgin placed shares to HNA, and an 18 percent premium to Virgin’s last closing price.”
‘This is a great example of managing a time-sensitive process, and leveraging our international network to achieve a high-value outcome for our client under incredibly challenging circumstances,’ says Sam. “It took a great deal of trust from our client, and ultimately teamwork, to get this divestment across the line. We are aware of how important the divestment was to Air New Zealand and its market credibility, and we are proud of the result we achieved together.’
Meet the Investment Banking Team
David Watt advises a broad range of New Zealand and international clients on mergers, acquisitions, divestments, equity offerings and debt issues and capital raisings, with a focus on financial Institutions and the industrials sectors.