Virgin Australia announced this week that it is set to return to the Australian share market with a bumper-sized $685 million initial public offering (IPO).
The offering, Australia's largest for the year so far, will see Bain's stake drop to 39.4% from about 70%.
Qatar Airways, which recently bought into the airline, will retain a 23% holding, according to a deal term sheet seen by Reuters.
"The airline's IPO is being carried out through a front-end book-building process, which means investor bids are taken ahead of the prospectus being reviewed and approved by Australian regulators."
"Institutional investors will be allowed to lodge their bids for the shares until Thursday, and the stock is due to start trading on June 24, the term sheet showed."
The term sheet shows that shares will be offered at a fixed price of $2.90 per share, valuing the company at A$2.32 billion on a fully diluted basis.
For context, Virgin Australia's rival Qantas Airways Ltd (ASX: QAN) 's share price was $10.40 at close on Thursday afternoon, down 2.8% over the day.
The Bain Capital-owned airline's decision to return to the ASX, after a five-year absence, is driven by an increase in demand for domestic tourism and spending.
Bain, a US private equity company, acquired the airline in 2020 after it went into voluntary administration, following COVID-induced travel restrictions.
If the IPO is successful, investors will likely view the move as a sign that Australia's consumer spending is in for a solid recovery.
Successful IPO looks likely for Virgin Australia
Reuters notes that in a bookrunner's message sent on Wednesday, investors lodged indicative bids for Virgin before book building began that would cover the size of the deal.
Domestic travel demand is also recovering, helped by the Reserve Bank's latest interest rate cuts.
The demand uptick has also supported a share price jump for Qantas. The airline reached an all-time peak of $10.97 on Tuesday, having risen 36.78% since early April.
Meanwhile, on Thursday afternoon, the S&P/ASX 200 (ASX: XJO) was 0.03% down for the day. It was up over 4.6% over the month.
Virgin reduced its international business over the past few years as part of its revival efforts. But it is due to resume long-haul flights through its partnership with state-owned Qatar. The two airlines are planning 28 new weekly return services between Doha and major Australian airports, Reuters reports.
"In March, 5.1 million passengers were carried on domestic commercial airlines in Australia, official figures show. That's a slight dip on last year but more than a four-fold increase from the peak of COVID in mid-2021."
An Australian Competition and Consumer Commission report reveals that Virgin had 34.4% of the market share as of March this year, while Qantas had 37.5%.
