Qatar Airways gets green light for Virgin Australia acquisition bid

Qatar’s flagship carrier Qatar Airways has received approval from the Australian government for its proposed acquisition of 25% of Virgin Australia, Reuters reported on Thursday. The Qatari carrier will acquire the share from US private equity firm Bain Capital, which would still retain the majority stake in the airline.

What’s in it for the Aussies? “It will bring USD 3 bn in value, we estimate, over the course of the five years that gets pumped into the economy as a consequence of increased visitation and knock on activity,” CEO of Virgin Australia Jayne Hrdlicka told The Australian last week.

There’s a small catch: Qatar Airways still needs a final nod from Australia’s treasurer Jim Chalmers, who has the right to cancel any global investments if they are deemed a risk to Australia's security. The current agreement also includes binding obligations to ensure adequate Australian representation on Virgin’s board and the safeguarding of its customer data.

A long time coming: Qatar Airways first proposed the uptake of the minority share of Virgin Australia Airlines, at an undisclosed figure, back in October.

What’s in the cards? As part of the transaction, Virgin Australia plans to launch flights from Brisbane, Melbourne, Perth, and Sydney to Doha from mid-2025 with leased aircraft. The flights will translate to over 100 new connecting itineraries across Europe, MENA, and Africa for Virgin customers. The increased traffic would spell benefits for Qatar’s Doha hub regardless of whether the Australian government approves Qatar Airways' multi-year lobbying effort to add additional routes.

Australia’s flagship carrier to face increased competition: The potential acquisition sparked concern due to the challenge posed for Australia’s flagship carrier Qantas Airlines — which currently splits the domestic market with Virgin Australia, with the latter holding 35% and Qantas and its budget airline Jetstar controlling 65% of the market share.

IN OTHER REGIONAL M&A UPDATES-

#1- PIF in early talks to acquire Italian jet parts maker: The Public Investment Fund (PIF) has reportedly entered into discussions with Italian state-backed industrial giant Leonardo to acquire its cash-strapped aerostructure unit, Bloomberg reported on Thursday, citing sources with knowledge of the matter. The ongoing talks may include plans to build a civil aviation manufacturing plant in Saudi Arabia, the people said.

The timing checks out: The sources said delegates from the PIF toured Leonardo’s southern Italy facilities earlier this week, just as CEO Roberto Cingolani — who recently confirmed securing a new investment partner — prepares to unveil details at the company’s strategy update on Tuesday, 11 March.

Throwing a lifeline: The PIF’s potential investment would provide much-needed financial support for Leonardo’s struggling aerostructure division which supplies key parts for Boeing’s 787 Dreamliner and Airbus A220 but has been hit by US production slowdowns.

About Leonardo: Founded in 1948, Leonardo, which is 30% owned by the Italian government, operates through five main divisions: Helicopters, Aircraft, Aerostructures, Electronics, and Cybersecurity. Its Aerostructures arm focuses on producing and assembling major structural components for commercial and military aircraft.

By the numbers: Leonardo’s aerostructure division employs some 4k people across four plants in southern Italy. The company reported revenues of EUR 746 mn last year, and an EBITDA loss of EUR 151 mn.

#2- Egypt-based Organi Group revive Rolling Plus’ tire factory project: Organi Group acquired 50% of Rolling Plus Chemical Industries to revive its EUR 1 bn tire factory project in the Suez Canal Economic Zone (SCZone) in partnership with Concrete Plus — which previously held a 70% stake in the company — an unnamed official told Asharq Business last week. Half of the factory’s production is planned for exports.

Why is this happening? Rolling Plus — a joint project between Concrete Plus and Gulf investors — signed a contract in September 2023 to establish a EUR 1 bn tire factory in the Ain Sokhna Industrial Zone to produce some 7 mn tires annually. Limited progress on implementation in the years since prompted the company to reach an agreement with Organi Group earlier this year to contribute half of Rolling Plus’ capital, the source told Asharq Business.

The details: The project is expected to be rolled out in three phases, beginning with a EUR 400-450 mn initial investment that will see the factory produce 3 mn tires annually. The second phase is expected to expand production, while the third will push output to 7 mn, adding heavy-duty tires.

Not the only local tire project in the cards: An unnamed Chinese company is reportedly looking to set up a USD 360 mn tire factory in the SCZone in partnership with the state-owned Arab Organization for Industrialization. Meanwhile, the government’s attempt to revive and develop state-owned tire manufacturer Trenco seems to be bearing fruit with an agreement to develop Trenco’s Alexandria-based factory with unnamed European companies and an agreement to establish a new Trenco tire factory with a Chinese company in Alexandria.

** Read more about Egypt’s fledgling domestic tire industry — and the challenges it’s facing — in this Inside Industry two-parter we published in 2023 (Part I | Part II).

#3- The shareholders of South African construction equipment outfit Barloworld rejected Saudi-based Zahid Group’s takeover offer, which had proposed purchasing all shares at ZAR 120 apiece, valuing the company at some USD 1.3 bn, according to a press release. The rejection triggered a standby offer by the Zahid consortium at the same price. Bloomberg also has the story.

What swayed the vote: The transaction failed to meet the 75% approval threshold, with key shareholders — including the Public Investment Corp., which holds a 22% stake — rejecting it due to concerns over corporate governance and the board's handling of the transaction. Other investors, such as London-based Silchester International Investors, had previously stated their refusal to sell for less than ZAR 130 per share.

IN CONTEXT- Heavy equipment distributor Zahid and Entsha placed a bid to fully acquire Barloworld in December 2024, offering a 30% premium on its last closing price and a ZAR 3.10 dividend. Zahid — holding a 19% stake in the firm — was looking to reap gains from an uptick in construction activity in the African market, projected to expand 27% by 2029 on the back of government outlays for infrastructure and strong consumer demand.