Singapore sale of Virgin share gives Branson access to Asia
A report by Forbes from Hong Kong says that British billionaire Richard Branson, the founder of Virgin Atlantic’s move to take back full control of the hugely successful airline by buying out minority shareholder Singapore Airlines, will free him from the shackles of a partnership that has prevented him from competing freely in Asia.
Branson confirmed at least twice with media on Tuesday that he would “consider” buying back the 49% stake from Singapore Airlines , first with a financial daily in London, the City AM, and later with Reuters.
That followed the revelation a day before by U.K.’s Daily Telegraph that Singapore Airlines was exploring options for a sale of the stake in Virgin Atlantic, estimated to be worth about $2 billion, or an initial public offering.
While Singapore Airlines has not taken an active role in management, its position as a significant minority shareholder has given it a veto right to block Virgin from expanding into international routes that would compete directly with the Singaporean carrier.
With both Virgin and Singapore Airlines moving aggressively of late to expand in the region amid a strong industrywide recovery, a noncompete alliance looks increasingly unsustainable.
According to the Centre for Asia Pacific Aviation, full control by Branson of Virgin Atlantic would also have “powerful ramifications” in the U.S. market, where it is close to launching transcontinental service from San Francisco to London. Virgin could link up via San Francisco with Australia.
Branson, ranked 245th on Forbes’ global rich list, was recently reported by a Malaysian newspaper to be negotiating to take a 20% stake in Fly Asian Express, the holding company of Malaysian budget airline AirAsia founded by entrepreneur Tony Fernandes, an odd move, for it would forfeit the chance to work with Singapore Airlines’ own budget unit.
Singapore Airlines itself is in the process of concluding talks to take a stake in China Eastern Airlines, with some in the market speculating that a sale of the Virgin stake could help it finance a deal with China Eastern.
Singapore Airlines came to the rescue of Branson in 1999 when he was strapped for funding, paying £600 million pounds in cash for the 49% stake.
Using that money, Branson went on a spending spree that turned Virgin into a wild success, as well as a successful push into other industries such as the mobile phone business.
Report by The Mole
John Alwyn-Jones
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