Etihad Airways to maintain its holding in Virgin Australia

Etihad Airways has cruelled Singapore Airlines’ chances of ­becoming the largest shareholder in Virgin Australia.

Etihad Airways has cruelled Singapore Airlines’ chances of ­becoming the largest shareholder in Virgin Australia after the Gulf carrier confirmed it would take up its full entitlement in Virgin’s $852 million capital raising.

Etihad yesterday broke its ­silence on its intention to participate in the raising after The Australian revealed the airline would be stripped of its seat on the Virgin board if it let its stake in Virgin fall below 20 per cent.

Had Etihad decided not to take up the one-for-one non-­renounceable offer at 21c a share, it would have seen its 21.8 per cent stake in Virgin halve to about 11 per cent. But it avoided that yesterday by declaring it would participate in the capital raising and spend about $186m to maintain its existing stake in Virgin.

“Etihad Airways is a long-term strategic investor and commercial partner to Virgin Australia, and remains fully committed to the partnership as a shareholder,” a spokesman for the Gulf carrier said.

Etihad’s participation will be welcomed by Virgin’s management, but it is unlikely to be cheered by rival Singapore Airlines, which was hoping to increase its stake by gobbling up any shares Etihad did not want.

Singapore Airlines holds about 815 million shares in Virgin, or 23.1 per cent. That stake will fall to 20.1 per cent when China’s HNA ­receives regulatory ­approval to invest in Virgin.

Singapore Airlines had said it would spend up to $US200m ($268m) to increase its stake to a maximum of 25.9 per cent.

But with Etihad’s confirmed involvement, there is unlikely to be enough shares for that to eventuate. The Singaporean airline will now have to wait to see how retail shareholders respond to the raising before it can ­increase its stake.

Virgin’s other major shareholders — Virgin Group, HNA and Nanshan Group — have also committed to the raising.

Air New Zealand, which owns 2.5 per cent of Virgin after selling most of its stake to Nanshan, will spend about $20m to take part in the raising.

As part of its participation in the capital raising, HNA — China’s biggest privately owned airline — will be allowed to ­increase its stake in Virgin to 19.99 per cent at a cost of $US300m.

The HNA top-up placement is subject to shareholder approval. Existing shareholders Singapore Airlines, Etihad Airways, Virgin Group and Air New Zealand have advised Virgin they intend to vote to approve any top-up placement to HNA.

Depending on how Virgin’s free-float shareholders react to the raising, the split in equity after the close of the offer will be Etihad with 21.8 per cent, Singapore Airlines with 20.1 per cent, HNA on 19.99 per cent, Nanshan on 19.98 per cent, Richard Branson’s Virgin Group on 8.7 per cent and Air NZ on 2.5 per cent. The rest will be with retail shareholders.

Final results of the raising will be known next Tuesday.