Tiger's parent fires off salvo
In a strongly worded statement to the Singaporean stock exchange, Tiger Airways Holdings said it "does not plan to and will not seek new investors" for its Australian operations if the Australian Competition and Consumer Commission rejects Virgin's bid to take majority control.
"Virgin is the right party to partner Tiger, and will be able to strengthen Tiger Australia," it said.
"Tiger does not see, for example, a buyer who is a financial investor or non-Australian airline being able to provide operational synergies to enhance Tiger Australia's competitiveness. In other words, a new investor will not achieve Tiger's objective to turn around Tiger Australia."
The watchdog has signalled it could go either way in deciding whether to approve Virgin's $35 million bid for a 60 per cent stake in Tiger. The ACCC raised reservations about the deal because it will effectively return the country to an airline duopoly by removing a third independent player in Tiger.
But it is conscious that a rejection could lead to Tiger's Singaporean parent deciding to close the operations in Australia. Tiger Australia has notched up losses totalling more than $216 million since 2007.
Brokers, including Citi, UBS and CBA Equities, believe the regulator will eventually approve the deal when it decides on March 14.
While noting that the ACCC's concerns were valid, Macquarie Equities said that Tiger's ongoing losses suggested a worse alternative for consumers.
"Absent the Virgin deal, we believe Tiger Australia is at risk of being shut down given the shift in mindset of the Tiger board of directors who are increasingly concentrating their focus on the ASEAN market, and who have conceded Tiger is always going to struggle as an independent player in Australia," the Macquarie analysts said.
The analysts believe Tiger and Virgin will talk up over coming weeks the likelihood of Tiger exiting the Australian market if the deal is not approved.
In contrast to the Singapore-based Tiger, Virgin has been careful in its response to the regulator's so-called "statement of claims" released on Thursday, issuing a three-line statement in which it said the deal would boost competition in the Australian market to the benefit of consumers.
Virgin's purchase of a 60 per cent stake in Tiger's Australian operations is aimed at giving Australia's second-largest airline its own dual-brand strategy to counter Qantas and its budget offshoot, Jetstar.
Last week, shareholders in Tiger Airways Holdings voted in favour of Virgin taking majority control.
Frequently Asked Questions about this Article…
Virgin Australia has offered $35 million to acquire a 60% majority stake in Tiger's Australian operations, a deal intended to give Virgin a dual-brand strategy to better compete with Qantas and Jetstar.
Tiger's Singaporean parent warned the Australian Competition and Consumer Commission (ACCC) that it 'does not plan to and will not seek new investors' if the Virgin deal is rejected, arguing that only Virgin can provide the operational synergies needed to turn around Tiger Australia.
The ACCC has signalled reservations that the deal would effectively return Australia to an airline duopoly by removing a third independent player, which could reduce competition in the domestic market.
The article says the ACCC is conscious that rejecting the deal could prompt Tiger's Singaporean parent to close the Australian operations. Brokers and analysts warn Tiger faces the risk of being shut down if the deal doesn't proceed.
The ACCC was expected to decide on March 14, and brokers including Citi, UBS and CBA Equities believe the regulator will eventually approve the Virgin deal.
Macquarie Equities analysts said Tiger's ongoing losses—more than $216 million since 2007—suggest a worse alternative for consumers if Tiger continues as an independent, struggling player, implying the Virgin deal might be preferable to closure.
Virgin issued a brief, three-line statement saying the acquisition would boost competition in the Australian market to the benefit of consumers, without addressing the ACCC's detailed concerns.
Yes. The article states that shareholders in Tiger Airways Holdings voted in favour of Virgin taking majority control of Tiger's Australian operations.
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