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China's Nanshan Group has taken control of Air New Zealand's remaining shares in Virgin Australia for 301.4 million Australian dollars, giving Chinese backed airlines a near one-third stake in Australia's second largest airline.
In a statement to the ASX on Friday, Virgin Australia said Air New Zealand has agreed to sell China's Nanshan Group 19.98 percent of its stake in the second ranked carrier for 33 Australian cents (24.48 U.S. cents) per share.
"We believe Nanshan Group will be a very strong, positive and complementary shareholder for Virgin Australia," Air New Zealand chairman Tony Carter said in the statement.
"The sale will now allow Air New Zealand to focus on its own growth opportunities."
Virgin's shares shot up 6.07 percent, or 0.02 cents to 30 Australian cents (22.25 U.S. cents) by 11.10 local time (AEST).
In March, Air New Zealand flagged it was seeking to sell its 25. 9 percent stake in Virgin Australia as questions continued over the airline's balance sheet.
The announcement was just days after Virgin Australia said it was seeking a 425 million Australian dollar (315.25 million U.S. dollars) cash facility from its four biggest shareholders at the time, Air New Zealand, Singapore Airlines, Etihad Airways and the Richard Branson owned Virgin Group.
It was believed the selling of Air New Zealand's stake would have been difficult as any new purchases would have to take on the airlines 131.2 million Australian dollar (97.32 million U.S. dollars) portion of the cash loan, and would also be expected to participate in any new future equity raising to draw down debt.
Air New Zealand's sell down comes less than two weeks after China's HNA aviation bought a 13 percent stake in the Australian carrier for 159 million Australian dollars (117.94 million U.S. dollars) in a major strategic partnership that will see the carrier leverage China's fast growing aviation market.
HNA's acquisition diluted Air New Zealand's shares to 22.5 percent, while Virgin Australia's remaining shareholders also had their equity stakes diluted from the issuance of new shares. HNA, over time, will seek to increase its holdings to 19.99 percent.
Virgin needs the cash injection to pay down debt as it expands out of the low-cost market to compete with Australia's top ranked carrier Qantas.
Air New Zealand's remaining holdings will be considered in due course, the company said.
Both deals require China's regulatory approval.
Once approved, Nanshan will nominate a member for the board, which Virgin will consider.
(APD)
