How Corrigan Waited In Wings
Sydney Morning Herald
Wednesday March 13, 2002
Brian Robins explains the Virgin Blue deal.
It was a deal done four months ago. But spurned by the failed Ansett's administrators in favour of Lindsay Fox and Solomon Lew, Chris Corrigan put his latest audacious venture on ice, waiting for the day his rivals stumbled.
Corrigan had been relaxed late last month as the deadline for the planned Fox-Lew acquisition of Ansett loomed. The clock was ticking louder, yet there were precious few indications the new buyers had made much progress.
Within 24 hours the chance to acquire key Ansett assets would be his. He did not want any of the Ansett operations, with their unwanted industrial relations history, just assets such as terminals and maintenance facilities.
Corrigan and Virgin Blue had already nutted out an agreement in November, with Corrigan to pay $300 million for a stake in Virgin Blue, which would then acquire the Ansett assets.
But the Ansett administrators rejected the offer: they already had a deal in place to sell Ansett to Lew's and Fox's Tesna.
After Tesna pulled out at the 11th hour and Ansett collapsed late last month, Corrigan and Virgin Blue were the only possible buyers still standing.
They immediately resumed talks on just how much Corrigan would pay for a half interest in Virgin Blue. At the same time, Patrick was talking with the Ansett administrators, discussing details of the Ansett assets for sale.
Virgin Blue had held out the prospect of listing its shares on the stock exchange, although with the need to raise funds quickly to fund the purchase of Ansett assets, Corrigan's Patrick Corp was the best option to pursue.
And yesterday, Patrick agreed to pump $260 million into Virgin Blue, taking a half stake, with some of that money to be used to acquire Ansett assets such as its terminals and maintenance facilities.
And from here on in, the negotiations with the Ansett administrators will ratchet up another notch, as Corrigan and Virgin Blue seek to get the best price possible for assets, given that there are no other serious buyers.
In only the space of a matter of weeks, Corrigan, the former investment banker who busted the stockbroking industry in the 1980s and the waterfront unions in the '90s, has emerged as the single most powerful figure in the transport sector.
Just last month Patrick Corp succeeded in a joint $1.1 billion bid to buy NRC and FreightCorp, the rail freight businesses of the Federal and NSW governments.
Now, with the acquisition of half of Virgin Blue, Corrigan is the most powerful figure in the transport industry since the late Sir Peter Abeles.
His business model is remarkably similar to Virgin Blue's: low cost and high volumes, which in turn feed through to still lower costs, as it keeps pressure on the competition.
This is why Corrigan moved from the wharves into the train industry, as he moves freight around the country and through his ports. Now aviation, where the same business model applies. Corrigan sees rail as the best transport medium between cities for freight, and aircraft for people.
As a frequent flyer on Virgin Blue, he knows the start-up is not just a backpackers' special, but that more and more business people are using the airline, giving it a solid business base.
© 2002 Sydney Morning Herald