Branson loses Virgin Blue battle

TRANSPORT group Patrick Corporation has triumphed over Sir Richard Branson in a tussle for control of Australian budget airline Virgin Blue. It is the second setback for Branson in just over a week. He has also been forced to pull the plug on Virgin Electronics, which failed in its attempt to challenge Apple and its iPod dominance.

The Virgin Blue win by corporate hard man Chris Corrigan, Patrick's chief, is a blow to Branson's prestige and will almost certainly mean the departure of his hand-picked Virgin Blue boss Brett Godfrey.

Godfrey, a former Virgin Atlantic employee, first took the idea of the airline to Branson and was briefly a superstar as the carrier, which started in 2000 with two planes, captured 30% market share and profits surged.

But Godfrey has been less sure of himself in the face of aggressive competition from Qantas. He opened the way for Corrigan's A$1.90-a-share move by warning that profits could dive by 15%.

While Virgin Group said the bid was opportunistic and undervalued the company, it failed to force Corrigan to improve it. Corrigan has been at odds with Godfrey over his strategy to attract passengers by slashing fares and will instead focus on profitable routes.

Patrick's stake in Virgin Blue today edged up to 50.3%. When it launched its A$1.1bn (£452.2m) hostile bid, it had 45.4% compared with Virgin Group's 25.1%. The offer was extended until 1 April in accordance with Australian law.

Corrigan has always said that if Patrick did not achieve full control of the airline he would be content to own more than half, giving him a greater say in how the airline was run. He has always made clear where he disagreed with Godfrey and Branson.

The canniness of the deal has cemented Corrigan's position as one of the cleverest players in the Australian market and investors are expected to back his strategy.

'We've underestimated the competitive threat that Jetstar brings,' Corrigan said last month, referring to the airline's new Qantas-backed low-cost rival. 'I certainly don't intend to continue growing capacity at 60%, it's patently suicidal.'

Analysts say he has a bargain investment. An independent valuer, Grant Samuel and Associates, said that Virgin Blue shares were worth between A$2.43 and A$2.90.

One Sydney broker wrote in a newsletter to clients: 'Chris Corrigan is one of the most respected Australian CEOs alive. With him at the helm Virgin Blue could well be a good investment. It will almost certainly be a better investment.'

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