Toll offloads Virgin Blue to pursue logistics growth

By: Jason Whittaker

Toll Holdings will finally offload its controlling stake in Virgin Blue through a share sale, two years after it acquired

Toll Holdings will finally offload its controlling stake in Virgin Blue through a share sale, two years after it acquired the airline through the acquisition of Patrick Corporation.

Toll won a bitter takeover fight for Patrick in 2006, but immediately announced it would sell Virgin because it was not part of the group’s logistics activities.

But after failing to find a buyer Toll has today announced it will pay a "in specie" dividend to offload the stake, handing majority control back to Richard Branson’s Virgin group.

Toll Managing Director Paul Little says the "compelling" transaction allows both companies to "pursue their own development strategies. The sale will strengthen Toll’s balance sheet, he says, allowing it to focus on growing its core global logistics business.

Toll will retain links with Virgin Blue through its long-term freight agreement.

The company has hinted it will go after acquisitions with the capital from the sale.

"The strength of Toll’s balance sheet following the Virgin Blue distribution together with the recently completed sale of the New Zealand rail and ferry operations, positions the company extremely well to take advantage of lower acquisition valuations becoming available in the sector," says Toll Chief Financial Officer Neil Chatfield.

He says net debt after the transactions will be $650 million, providing capital to pursue the growth strategy.

"We are currently reviewing a number of exciting acquisition opportunities within the region and in support of the development of our global forwarding strategy," Chatfield says.

The company will reduce the value of its investment in Virgin Blue down to the market value based on the current share price of Virgin Blue and will provide for the special dividend.

In an update to the market, Little says Toll’s logistics operations are performing in line with forecasts and major costs remain "well controlled".

Fuel surcharging is proving effective in managing fuel price volatility, he says.

"In addition to the continued growth in Australia and New Zealand, we have made solid progress in developing and integrating the company’s global forwarding platform and improving Toll Asia’s growth profile," he says.

Toll will release its 2008 full-year results on August 26.

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