Virgin says $1.1b offer too low for discount airline

LONDON - Richard Branson's Virgin Group considers Patrick Corp's A$1.1 billion ($1.19 billion) offer for control of Australia's Virgin Blue discount airline too low, said Will Whitehorn, a spokesman for the British company.

"We believe the offer hugely undervalues the company," he said.

Virgin Group controls about 25 per cent of the Brisbane-based carrier. Patrick owns 45.4 per cent of Virgin Blue and it is bidding on the rest of the company.

The offer by Patrick, Australia's biggest port handler, comes as Virgin Blue said earlier this month that full-year profit might drop as much as 15 per cent because the company had cut prices to compete with Qantas' discount airline, Jetstar.

Virgin Blue shares rose yesterday to A$2.08. Patrick is offering A$1.90.

Virgin Blue has grown from two planes in 2000 to 49 today.

Too-rapid expansion, plus the price-cutting, hurt earnings, the company has said.

Patrick, based in Sydney, paid A$500 million for its share of the airline in 2002.

Its offer is less than the A$2.25 Virgin Blue public offering in 2003.

- BLOOMBERG