Patrick move pares back flotation of Virgin Blue

The flotation of Sir Richard Branson's no-frills Australian airline Virgin Blue is set to go ahead later this year although on a scaled-down basis which is likely to see only 10 per cent of the business sold to investors.

Sir Richard, who owns half of Virgin Blue, had hoped to float at least 30 per cent of the airline but he has been blocked from doing so under a shareholder agreement with Patrick Corporation which owns the other half of Virgin Blue.

Sir Richard thought Patrick was obliged to float the same proportion of its shareholding as he was prepared to sell, but an independent arbitrator has ruled this is not so.

Patrick has indicated it is only interested in selling a 5 per cent stake of the airline, which is valued at between 1.5bn and 2bn Australian dollars (£615m-£820m), and Sir Richard will limit himself to selling the same proportion to avoid ending up with a smaller stake than Patrick.

Patrick has agreed to pay Sir Richard A$30m for every A$100m increase in Virgin Blue's market capitalisation above the initial buy-in price of A$600m. This means that if Virgin Blue floats for between A$1.5bn and A$2bn Patrick will pay Sir Richard between A$270m and A$420m.