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Air NZ sells stake in Virgin Australia

NZN 9/06/2016 Tina Morrison

Air New Zealand has sold a 19.98 per cent stake in Virgin Australia to Chinese company Nanshan Group and is considering options for its remaining 6 per cent holding.

The carrier said it will sell the stake in Virgin Australia at 33 Australian cents per share, a premium to Virgin's last traded price on the ASX of 28 Australian cents.

Last month Virgin, Australia's second-largest domestic airline, issued new shares at 30 Australian cents apiece to a unit of HNA Aviation Group giving it a 13 per cent stake.

Air New Zealand announced in March that it was considering selling its stake in Virgin Australia and had hired First NZ Capital and Credit Suisse to advise on its options.

The Kiwi carrier has spent an estimated $A373 million ($NZ393.8 million) building up and maintaining the Virgin stake since 2011 but faces a considerable loss on that investment.

Virgin's share price dropped early this month after brokerage Credit Suisse indicated it could require an $A1 billion equity raising, double previous expectations, to reduce debt to reasonable levels after it posted a profit warning.

"We believe Nanshan Group will be a very strong, positive and complimentary shareholder for Virgin Australia," Air New Zealand chairman Tony Carter said.

"The sale will allow Air New Zealand to focus on its own growth opportunities, while still continuing its long-standing alliance with Virgin Australia on the trans-Tasman network".

Air New Zealand and Virgin formalised an alliance in 2010 with codesharing agreements on trans-Tasman and connecting flights and reciprocal frequent flyer and lounge access deals.

Nanshan Group is a large, privately owned Chinese conglomerate with interests across a diverse range of industries including its own emerging airline, Qingdao Airlines, launched in April 2014.

The sale is subject to and will take place after receipt of Nanshan Group regulatory approvals from Chinese authorities.

Keeping the stake below 20 per cent prevents the triggering of regulatory approvals required under Australian law.

Air New Zealand shares last traded at $2.17, and have dropped 27 per cent this year.

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