Private equity firm BGH Capital is understood to be joining forces with Canadian pension fund CDPQ in its quest to buy Virgin Australia, taking on Indian billionaire Rahul Bhatia who is also vying for the failed carrier.
As revealed by DataRoom online on Tuesday, Mr Bhatia’s InterGlobe Enterprises has hired advisory firm Investec to compete for the airline ahead of expressions of interest due on Friday.
CDPQ — Caisse de depot et placement du Quebec — is an institutional investor that manages pension plans and insurance programs in Quebec and has $C340bn ($375bn) of assets under its management, including airports and other aviation assets.
BGH Capital is advised by Moelis and Arnold Bloch Leibler.
InterGlobe is understood to have local tourism and aviation experts in tow as part of its approach. Mr Bhatia is the founder and largest shareholder of the Indian budget carrier IndiGo, although it is his company rather than the airline that is putting forward the Virgin Australia proposal.
Other firms assisting his bid include law firm Corrs Chambers Westgarth and accounting firm PwC.
Virgin Australia, founded by British tycoon Richard Branson, entered voluntary administration last month with $6.8bn of debt.
Involved in the sale process being run for the airline is administrator Deloitte, restructuring firm Houlihan Lokey and investment bank Morgan Stanley.
Should Mr Bhatia’s interests secure Virgin Australia, the thinking is that there would be strong expertise applied to transforming the failed carrier into a profitable airline with plenty of financial firepower, offering domestic and trans-Tasman services.
Mr Bhatia and his father Kapil have an estimated fortune of $US3.4bn ($5.25bn) according to Forbes. InterGlobe has already invested in Australian’s tourism industry with a hotel development in Melbourne.
They own about 51 per cent of IndiGo, which the Bhatias founded with Rakesh Gangwal. It is the largest carrier in India by passengers and has a market value of about $8bn after listing around 2015.
InterGlobe will be going up against other private equity suitors, including the KordaMentha-advised Bain Capital, which also has law firm Herbert Smith Freehills and former Jetstar boss Jane Hrdlicka in its corner and is thought to be working with the Future Fund.
Macquarie Group was earlier working with Brookfield, but is understood to be no longer in the mix.
Mr Branson could emerge in a consortium. Others mentioned as possible suitors are Wesfarmers and Andrew Forrest, along with Oaktree and state governments such as Queensland through the Jefferies-advised Queensland Investment Corporation, and other airline interests such as Etihad and Singapore’s Temasek and airport interests.
Information memorandums promote the opportunity to turn Virgin Australia into a profitmaking airline, with the sales pitch involving a forecast $1.2bn of earnings before interest, tax, depreciation and amortisation with $5bn of revenue in 2022, as reported by The Australian earlier this month.
The field will likely narrow considerably when the sales process heads towards its conclusion next month for what is a highly complex and challenging asset.
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