Retail advisers such as Morgans, Ord Minnett, Shaw and Partners and Bell Potter have made submissions to Bain Captial as to why they should land a co-lead manager role for the $3bn-odd listing of Virgin Australia, likely by June.
The understanding is that brokers hoping to be involved in the initial public offering have made an appeal to Virgin hoping to be appointed to win over appeal to Mum and Dad investors for what could be the largest float of the year.
But retail investors have long memories, and some may have already been burnt by Virgin Australia’s $325m retail bond offering in 2019 after the airline collapsed a year later, with them receiving back only a fraction of their investment.
The advisers to retail investors will be added to the deal with investment banks Barrenjoey, Goldman Sachs and UBS, which are spearheading the IPO campaign.
They are about to reapproach investors in the coming days to test interest surrounding price and whether to explore a cornerstone deal where shareholders are locked in for a portion of the deal upfront.
It will be interesting to see what strategy that Virgin Australia’s advisory team pursue.
A tight deal targeting mainly institutional investors, where only a limited number of shares were sold, proved a winning formula for Guzman y Gomez when it listed last year with its share price at $31 after the IPO price was $22.
Another approach could be selling a larger part of Virgin Australia, with retail investors playing a major part.
But that was the strategy for the listing of the DigiCo Infrastructure REIT last year by David Di Pilla’s HMC Capital, and shares are now around $3.18 after being sold at about $5 each in the IPO.
Yet, targeting retail investors presents a compelling opportunity for Virgin Australia to boost its Velocity Frequent Flyer membership and take market share from Qantas by promising participants in the IPO some sort of financial incentive to use the airline.
DataRoom understands that investor interest from a select group of parties will be tested in the coming days, and should demand be there for a listing, their commitments could be locked in ahead of an IPO, likely slated for June.
While the markets may be volatile, the time could be right for Virgin to list, as Qantas has rallied almost 62 per cent in the past year.
Virgin Australia said it had made a record $439m in underlying earnings for the 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 in 2020 after it collapsed, for $700m, when it had about $5.15bn of debt.
Already, Bain Capital has 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 and, 7000 staff.
The airline also has a domestic network of 66 routes and a targeted short haul international network.
A valuable part of Virgin is its Velocity loyalty program – it is Australia’s third largest, with 11 million members and 80 partnerships.
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