Sir Richard Branson to pocket $500m in Virgin America sell-off

The takeover would value Virgin America at more than twice what it was worth when it went public

Jamie Nimmo
City correspondent
Monday 04 April 2016 02:01
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Branson's business empire is valued at around $5-5.5 billion
Branson's business empire is valued at around $5-5.5 billion

Sir Richard Branson is set for a near-$500m (£351.3m) payday as his US airline Virgin America edges towards a sale.

Alaska Air is said to be closing in on a deal worth more than $2bn for the California-based airline, which was spun out of Branson’s Virgin Group and floated on Nasdaq in 2014.

Reports suggest that Alaska Air is set to shell out as much as $58 per share for Virgin America, with a deal due to be announced as early as today.

The takeover would value Virgin America at more than twice what it was worth when it went public at $23 per share. The shares closed last week at $38.90, valuing the company at $1.5bn.

The share price has risen in recent weeks as news emerged that the airline was sounding out potential buyers. Seattle-based Alaska Air appears to have beaten rival suitor JetBlue Airways, which would be overtaken as the fifth-largest airline in the US by traffic by the enlarged group if the deal goes ahead.

Sir Richard retains around 22 per cent of Virgin America through his offshore investment vehicle VX Holdings, which would make a $2bn sale worth up to $480m to the businessman.

As a British citizen, Sir Richard, whose Virgin empire spans trains and space travel, is restricted to owning less than 25 per cent of the company under foreign ownership rules in the US.

Virgin America’s launch was delayed in 2006 when the Department of Transportation prevented the airline from starting up after intense lobbying from US rivals about its foreign ownership.

Virgin America’s first flight was in 2007, but its first profit came in 2013 as the airline started to slow its heavy investment and began charging more for seats on its planes.

Last year Virgin America racked up $1.5bn in revenues, a 2.7 per cent increase on 2014, while profits surged to $340m.

There has been a wave of consolidation among US airlines. The last deal was in 2013 when American Airlines and US Airways merged.

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