BREAKINGVIEWS-Virgin Australia IPO turbocharges Bain Down Under

By Antony Currie

MELBOURNE, June 24 (Reuters Breakingviews) - Taking an airline public while a war in the Middle East pushes up fuel prices is not for the faint of heart. That's what Bain Capital had to do after Israel launched attacks on Iran less than a week after the private equity firm kicked off the initial public offering for Virgin Australia VGN.AX, which is also 25%-owned by Qatar Airways. Tuesday's stock market debut, though, soared past the turbulence.

It helped that U.S. President Donald Trump claimed a ceasefire is imminent. Even so, Bain and its bankers - Goldman Sachs, UBS and Barrenjoey - priced the deal smartly.

At A$2.3 billion ($1.5 billion), the IPO values Virgin's equity at around 7 times expected earnings for the 12 months to the end of June. That's a discount to market leader Qantas Airways QAN.AX, which flies with a more than 9 times multiple, even though the two are well matched for financial performance. Both are likely to grow the top line almost 9% and the bottom line around 30% this financial year, with Qantas slightly ahead on both.

That may look like Bain is leaving money on the table - and perhaps it is. But it has now recouped almost triple the A$731 million it paid to buy the carrier out of administration in 2020. That's courtesy of the IPO proceeds, selling 25% to Qatar Airways in a deal that closed earlier this year, 5% to Virgin Group and 2% to the airline's home state of Queensland in 2021, and its share of a A$730 million dividend two years ago.

All in, that implies Bain is sitting, on paper, on a roughly 40% internal rate of return. What's more, Bain and its non-Qatar partners are keeping a 40% stake, most of which cannot be sold for a year.

That was already worth some 9% more after early trading on Tuesday added lift to Virgin's shares. Assuming the skies - and battlefields - remain clear, Bain looks set to add more to its already first-class return.

Follow Antony Currie on Bluesky and LinkedIn.

CONTEXT NEWS

Virgin Australia shares opened 8.3% higher on June 24 following an initial public offering that gave the airline a market capitalisation of A$2.3 billion ($1.49 billion).

Before the IPO, Bain Capital was Virgin's majority owner, having bought the company out of administration in 2020. In February 2025, the private equity firm concluded a deal selling 25% of the airline to Qatar Airways.

Bain sold a 30% stake, raising A$685 million, and after the IPO will remain Virgin's largest shareholder with 40%.