ANA said to spend 100b yen to turn Peach into subsidiary

[TOKYO] ANA Holdings Inc's board will meet Friday to consider increasing its stake to a majority holding in Peach Aviation Ltd, a move that would give Japan's largest airline a bigger foothold in the budget travel market.

ANA plans to spend about 100 billion yen (S$1.25 billion) to boost its stake to more than 50 per cent from about 39 per cent, making budget airline Peach a subsidiary, people familiar with the matter said, asking not to be identified because the talks are private. The plan was first reported by the Nikkei business daily. The company isn't the source of the report and will discuss a resolution at a board meeting Friday, ANA said in a filing.

Budget travel is slowly gaining popularity in the country, where ANA and Japan Airlines Co have dominated decades of travel in a country also famous for highly efficient bullet trains. At least four budget airlines, including Jetstar Japan, have sprung up in the past six years in the country.

ANA, parent of All Nippon Airways, plans to buy about half the shares owned by Hong Kong-based investment firm First Eastern Aviation Holdings Ltd and the public-private Innovation Network Corp of Japan, according to the people.

The purchase would make Peach the second low-cost carrier subsidiary of ANA, which already owns 100 per cent of Japan's Vanilla Air Inc.

"We take the move by ANA management as a positive step to bring a second major LLC under its wings, which would give it more leverage and flexibility in the future, including a possible Peach merger with Vanilla," said Hiroshi Hasegawa, an analyst at SMBC Nikko Securities Inc, wrote in a report Friday. "That said, we question the price and future return on investment." Kyodo News later reported that ANA would pay about 30 billion yen for the additional stake.

Shares of ANA rose 0.3 per cent to 338.8 yen as of 11:30am in Tokyo, while the Nikkei 225 Stock Average declined 0.2 per cent.

ANA is the largest shareholder of Peach, followed by First Eastern Aviation with 33 per cent and INCJ with 28 per cent.

BLOOMBERG