Bain’s sales pitch for Virgin IPO is its discount to Qantas

Virgin Australia’s likely IPO share price could be set within weeks. Picture: Bloomberg

Virgin Australia’s selling point for its IPO is the shares will be offered at a 30 to 40 per cent discount to rival Qantas, say sources.

As Bain Capital continued work on its process to bring in cornerstone investors for a float last week, further details are filtering out about what its IPO could look like as expectations grow that a deal will get across the line.

The IPO size is shaping up to be around $700m and some sources say the price will be set this week

Analysts say Qantas is trading at 4.1 times forecast annual earnings before interest tax, depreciation and amortisation for the 2026 financial year and 8.8 times forecast net profit.

That could see Virgin priced between 2.87 times and 2.46 times EBITDA and 5.3 to 6.2 times forecast net profit based on a 30 to 40 per cent discount.

There was some talk that the deal will be at 6.3 times PE.

Private equity owners have opted for a smaller IPO where cornerstone investors are locked in, as part of its plans to list as a business that could be worth between $2bn and $3bn.

The price of Qantas shares has soared in the past year by almost 80 per but a challenge is general market volatility, brought about through uncertainty around US President Donald Trump’s trade wars.

Some institutional investors are sidestepping the deal, wary that Virgin Australia may have sizeable capital spending requirements and because efforts to take market share from bigger rival Qantas will come at a cost.

Advisers spearheading the IPO campaign are Barrenjoey, Goldman Sachs, UBS and ­Reunion Capital and investor meetings last week were under way.

Virgin Australia said it made a record $439m in underlying earnings for the latest half year.

The Dave Emerson-led management team has already held a non-deal roadshow for its IPO in March.

The business was purchased by Bain Capital for $700m in 2020 after it collapsed with about $5.15bn of debt. Bain Capital sold 25 per cent of Virgin Australia to Middle Eastern carrier Qatar Airways for about $750m, valuing the airline at $3bn.

Virgin Australia is the country’s second-largest carrier with 19 million passengers, 7000 staff, 66 domestic routes and the Virgin Velocity loyalty program with 11 million members.

Elsewhere, family-owned land lease community operator GemLife is understood to have settled on value for its listing of close to $2bn. The understanding is the Puljich family owners will not sell any shares in an IPO, likely to be around $700m, rather just raise new money to pay down debt and fund growth. Sources say the price equates to 15 times the company’s net profit.

The business sells manufactured homes to the 50-plus section of the market on Australia’s east coast. It was previously on the market for $2bn.