Virgin Blue’s decision on Wednesday to pay its first dividend despite a 33 per cent drop in profits sparked an angry war of words between Sir Richard Branson and Chris Corrigan’s Patrick Corporation, the airline’s main shareholders.
Sir Richard, whose Virgin Group owns 25 per cent of the low-cost carrier, claimed that stevedore operator Patrick, which owns 62.5 per cent, had forced the A$0.25 per share dividend against the wishes of three Virgin Blue directors - including its chief executive Brett Godfrey.
In a statement, Sir Richard signalled that the A$262m (US$191m) dividend payment had not been properly discussed at boardroom level and attacked the “lack of process, clear analysis and timing available to make a decision on this issue”.
Patrick Corp is fighting off a hostile A$4.6bn bid from domestic rival Toll Holdings, which has pledged to cut Patrick’s stake in the airline to 10 per cent and allow Virgin Group to lift its holding to 40 per cent if its takeover attempt is successful.
Sir Richard’s statement added: “We continue to look forward to the early success of the Toll proposed takeover of Patrick Corporation so that we can ensure Virgin Blue is run in accordance with best practice corporate governance and reflects a better shareholding structure.”
Toll also released a statement, claiming that Patrick had forced Virgin Blue to pay a special dividend to “help plug part of its cash flow deficit as part of its takeover defence from Toll”. Patrick, which has four directors on the Virgin Blue board compared to Virgin’s two, will gain around A$160m from the payment.
Toll added: “The justification to pay a special dividend of this magnitude is not clear, but it appears to be a case of Patrick using its power as the largest Virgin Blue shareholder to put money into its own pockets. It is once again evidence of Patrick’s lack of vision and ill-conceived defence strategies.”
An embarrassed Mr Godfrey complained that boardroom decisions should remain confidential while Patrick on Wednesday night hit back, denouncing the Toll claim of a cashflow deficit as an “invention”.
A Patrick spokesman said: “All of Patrick’s businesses are cashflow positive and there are sufficient financing facilities to cover any forthcoming investment requirements.”
News of the dividend sent Virgin Blue shares up 9 per cent to A$1.82. The company’s profit for the year to 30 September was $105.2m, down 33 per cent on the year before.
The war of words is expected to intensify this week. Patrick Corp will on Thursday announce its full-year results while Paul Little, Toll’s combative chief executive, is scheduled to address a business luncheon in Melbourne on Friday.
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