Virgin Australia has announced it has entered into a share purchase agreement to acquire 60 per cent of Tiger Airways Australia.

Virgin will take the stake from Tiger Airways Holdings in a deal valued at AUD35 million.

In addition, Tiger Australia has agreed to make a payment of AUD5 million to Tiger Airways, if Tiger Australia achieves certain financial performance targets within five years.

Tiger Airways and Virgin Australia have committed to invest up to a further AUD62.5 million collectively into the business to fund growth in Tiger Australia.

The joint venture has flexibility to grow Tiger Australia’s fleet from 11 to up to 35 aircraft by 2018.

The transaction is subject to conditions and regulatory approvals, including ACCC clearance and FIRB approval.

As part of the transaction, Virgin Australia and Tiger Airways propose to enter into a Shareholders Agreement, Brand Licensing Agreement and Services Agreement.

Virgin Australia chief executive John Borghetti said: “This transaction enables Virgin Australia to access the budget market and enables Tiger Australia to expedite its growth, providing greater competition to this important market segment.

“By partnering with Tiger Airways, we can use our expertise to leverage Tiger Australia’s competitive cost base and build a sustainable budget carrier.

“We are committed to maintaining the Tiger Australia business model and brand, and we look forward to collaborating with Tiger Airways as the business grows”, Mr Borghetti said.