TWO investment banks (one Middle Eastern and one European) are expected to take up about 15% to 20% equity stake in the country's no-frills airline, AirAsia Sdn Bhd, for about US$20mil or RM76mil.
Credit Suisse First Boston is arranging the deal, and both investment banks have completed their due diligence on the airline. With the sale, Tune Air Sdn Bhd's 99.75% stake would be diluted to about 80%. Mofaz Air Sdn Bhd holds the balance 0.25% stake in the airline currently.
The deal, expected to be concluded over the next two to three weeks, will involve the issuance of new shares by Air Asia. The company will use the cash for its expansion.
The carrier, which operates six aircraft and flies to a dozen destinations within the country, is worth about US$133mil.
Initially, we thought we needed more money to fund a deficit but since AirAsia has turned profitable, there is no need to sell more stake,'' AirAsia chief executive officer Tony Fenandes told StarBiz in an interview.
Tune Air, which controls AirAsia, bought over the then loss-making carrier for RM1 in December 2001, and took over its debts of RM40mil. In December 2002, the company announced a profit of RM19.4mil for the first seven months of that year, having flown 1.1 million customers. It has paid all its debts except for RM2mil still due to Malaysia Airlines.
Just a year ago, not many wanted to know, or to be part of, AirAsia. Now it is spoilt for choice, Fernades said. AirAsia is only keen on long-term investors and those who believe in the low-cost model.
Fernandes said the two investment banks would not be part of the day-to-day running of the airline; this would be left to the current management team. However, board seats would be accorded to the new investors.
Fernandes' hope is that the sale would put to rest speculation on AirAsia's suitors, and at the same time dispel talk that Tune Air directors were cashing out.
At one point, big names such as Sir Richard Branson of Virgin Atlantic and even the Sabah government were bandied about as potential investors in AirAsia, although Fernades dismissed that as pure speculation.
We view the equity sale very positively as it gives us tremendous credibility as an airline. When the names are announced later, there would be some strategic value, besides it being a foreign direct investment,'' he said,
The US$20mil that the carrier will get from the equity sale will see its cash balance rising to more than RM100mil from RM30mil.
A listing for AirAsia is not on the cards just yet, although it is a long-term goal: the airline does not yet have a profit record for a direct listing, although it can opt for other corporate exercises. As Fernandes put it: Getting an investor is our immediate aim.''
We are in our early days and we must not get carried away. We should list the company for a reason,'' he said. At this point there is no compulsion for a flotation.
While it may be in its early days, there are others beyond Malaysia's borders which are keen to engage AirAsia's help to manage a low-cost carrier.
Said Fernandes: We have had several requests from companies abroad seeking technical assistance and help to set up low-cost carriers, one from a company in Lebanon.''