• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

U.S. Smart Money Scours Aussie, New Zealand Transport Sector

U.S. buyout specialists are striking deals for ground and air travel in Australia and New Zealand as they take advantage of recent lockdowns.
By ALEX FREW MCMILLAN
Aug 27, 2021 | 08:30 AM EDT
Stocks quotes in this article: KKR

Is it time to buy into a travel rally Down Under?

You're a bold investor if you do. But that is exactly what private equity firms KKR & Co. (KKR) and Bain Capital are doing.

New York-based KKR is buying Ritchies Transport, one of the largest bus companies in New Zealand.

Meanwhile, Virgin Australia said on Friday it will add nine Boeing BA 737-800 planes to its fleet from October, getting ready for an anticipated increase in Aussie domestic travel. Boston-based Bain Capital bought out Virgin Australia last November. Australia's second-largest carrier collapsed into voluntary administration in April 2020. It owed creditors A$6.8 billion (US$4.9 billion) when it entered administration, one of the first airlines around the world to collapse. Bain committed A$3.5 billion (US$2.5 billion) in financing, came up with a business plan that cut one-third of the staff and is getting the carrier back in the air.

Virgin shareholders took a beating as Bain took the competitor to Qantas QABSY private but averted disaster when the airline was burning through A$200 million in cash per month. Investors and employees ultimately bought into the plan. Bain now can slash and burn to turn "efficiencies" into a good sale price. But the Aussie government refused to bail Virgin out, so...

KKR didn't disclose the purchase price for Ritchies, but TechCrunch reports the deal values the bus company at more than NZ$500 million (US$347 million). That price tag would be a decent multiple on profits estimated at NZ$50 million per year for privately held Ritchies.

KKR says it's using money from its Asia Pacific infrastructure fund to finance the deal. It is KKR's first infrastructure investment in New Zealand.

Ritchies' buses have been rumbling on Kiwi roads for the last 86 years. The company runs a fleet of 1,600 unmistakable red-yellow-blue-striped buses through 42 depots around the country, serving some cities and local councils as well as private customers.

The Ritchie family will keep running the company, as it has since 1935. KKR pledges backing to help the company electrify its fleet.

Glenn Ritchie had protested earlier this year that it "doesn't ring bells to me" after the Australian Financial Review reported in March that the company had called in its bankers to find a "deep-pocketed new driver." The AFR said Ritchies had hired the Rothschild affiliate Cameron Partners to advise it on a sale. Looks like the AFR was right and Glenn's memory was playing tricks on him.

There has been other activity on the roads. Last year, the Australian bus company Kinetic agreed to buy Go Bus in New Zealand for around A$300 million (US$218 million). Kinetic itself is a rollup of several smaller Aussie bus companies orchestrated by its Canadian owner, the pension plan OPTrust.

Virgin Australia will have 77 planes in its fleet after increasing capacity, which should help it reclaim one-third of the Aussie airline market. It handed back many of its planes to its lessors during its downturn and near-collapse.

The company had a fleet of 85 Boeing 737s in June 2020, a couple months after entering administration, according to a Deloitte administrator's report. So it will be a smaller carrier than before COVID but ahead of the fleet of 30 to 60 737s that former CEO Paul Scurrah said would be in the air by mid-2021, depending on demand.

Both New Zealand and Australia have sealed themselves away from the rest of the world and are not letting international travelers in their domains. In Australia's case, it has a tight cap on how many Aussies it will let out, too. New Zealand suspended a mutual "travel corridor" with Australia in July when the Delta variant broke out in several Australian states.

New Zealand now says it plans to allow vaccinated travelers from low-risk countries to enter without quarantine, starting early next year. Australia says it will consider opening borders with low-risk nations if and when the vaccination rate reaches 80% of Australian adults. But a slow early rollout means only 25% of Aussies are fully covered, with 45% having had one shot.

Fortunately, both nations have a domestic market to fall back on. Citizens are encouraged to vacation locally and do their part to stimulate the economy. Qantas says this week it is moving forward with rather optimistic plans to start international travel with high-vaccine nations in December. Even more optimistically, it is bringing back five Airbus A380s to fly to the United States and Britain from mid-2022, a year earlier than originally forecast.

These deals are happening while the sector is beaten down and more than likely shortly before it gets back on its feet. Demand is high, not just for travel, but for travel companies. Expect more trips and deals to come.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, McMillan had no positions in the stocks mentioned.

TAGS: Mergers and Acquisitions | Investing | Stocks | Airlines | Transportation | Real Money

More from Stocks

The Indexes Cover Up Positive Action, for a Change

James "Rev Shark" DePorre
Jun 6, 2023 4:43 PM EDT

Is a rotation into the lagging names starting to gain traction? Let's see.

Fed's Relevance Appears to Wane

Peter Tchir
Jun 6, 2023 1:00 PM EDT

I may be guilty of wishful thinking, but it looks like the market is finally moving beyond the Federal Reserve.

7 Stocks I'm Trading as Small-Cap Rotation Takes Place

James "Rev Shark" DePorre
Jun 6, 2023 11:53 AM EDT

The gap between big-cap tech names and the rest of the market has to eventually close.

I'm AMPD About This ETF

Mark Abssy
Jun 6, 2023 11:30 AM EDT

The CNIC ICE U.S. Carbon Neutral Power Futures Index exchange-traded fund provides exposure to a blended national electricity price and carbon credits.

Play Unity Software This Way as the Stock Surges on Apple Vision Pro Partnership

Stephen Guilfoyle
Jun 6, 2023 10:40 AM EDT

Clues were out there, but the news certainly took most by surprise.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:19 PM EDT CHRIS VERSACE

    AAP Podcast: This Company Is Not Going 'Solo'

    Listen in as I talk with the very diversified Solo...
  • 01:51 PM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Adjusting Your Trading Approach to Shifting Market...
  • 06:54 PM EDT CHRIS VERSACE

    AAP Podcast: A Tongue -- and a Market -- Twister: 'Get a Debt Deal Done'

    Listen in as the Action Alerts PLUS Podcast tackle...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login