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Virgin launches $98.7m bid for Skywest
Virgin launches $98.7m bid for Skywest

Virgin Australia is to expand its presence in Australia and Asia after making a $98.7 million takeover swoop on WA regional carrier SkyWest and buying a majority stake in Tiger Airways.

News of the surprise deals came along with an announcement that Singapore Airlines had bought a 10 per cent stake in Virgin Australia for $105 million.

Virgin chief executive John Borghetti said the three deals were designed to accelerate the airline's growth, diversify its earnings and increase competition in Australia.

"The acquisition of Tiger Australia and Skywest provides Virgin Australia with a strong presence in the budget, fly-in fly-out (FIFO) and regional markets, enabling us to fast-track our expansion in these areas and become a stronger competitor,” Mr Borghetti said in a statement.

"These transactions will bring important benefits to Australia, driving growth in jobs, tourism and competition.”

If the deals receive regulatory and shareholder approvals, Virgin will expand its fleet to 139 aircraft and employ more than 9000 workers.

Under the deal with Tiger, the discount carrier will expand its capacity in Australia and have more attractive offers for customers.

Tiger and Virgin plan to spend up to $62.5 million on increasing the budget airline's fleet from 11 aircraft to 35 by 2018.Tiger will continue to use the Tiger brand for at least another 20 years.

Tiger chief executive Koay Peng Yen said the deal with Virgin was a significant step forward for the company.

"The joint venture will bring about a stronger and more competitive Tiger Australia, and allow us to deploy more capacity and attractive budget offerings to our customers,” he said.

Tiger Australia made a $20 million loss in the three months to September 30, an improvement from a $27 million loss in the same period in 2011.Revenue grew by $53 million to $62 million.

Under its cash and scrip takeover bid for Skywest, Virgin is offering 22.5 cents in cash and 0.53 shares in Virgin Australia for each Skywest share.

Skywest shares soared 15 cents, or 53.57 per cent, to 43 cents by 8.35am on the news.

Virgin said it had secured in-principle agreement from Skywest to go ahead with the offer, which is worth 46.88 cents per Skywest share.

Skywest executive chairman Jeff Chatfield said the offer, represented a substantial premium to the airline's share price and would only go ahead in the absence of a superior bid.

"Skywest will be appointing a Singaporean independent expert to advise the board on the value of the proposed consideration,” he said.

"Based on our advice it is likely that this proposal will take some months to fully play out."

Meanwhile, Singapore Airlines has paid $105 million for a 10 per cent stake in Virgin Australia.

Singapore, which entered an alliance agreement with Virgin in June 2011, has acquired almost 246 million Virgin shares at 42.88 cents each.

"We believe this investment demonstrates their confidence in our strategy and it enables Virgin Australia to fast track its growth plans,” Mr Borghetti said.

The deal has received approval from the Australian government's Foreign Investment Policy.

Virgin shares were up 2.5 cents, or 5.44 per cent, to 48.5 cents by 8.35am.