Chinese conglomerate Nanshan Group is poised to emerge as a major shareholder in Virgin Australia after agreeing to purchase a 19.9 per cent stake from Air New Zealand for around $232 million.
The deal, first reported by The Australian Financial Review, was announced to the New Zealand Stock Exchange on Friday morning. Nanshan will join the ranks of Singapore Airlines, Etihad Airways, fellow Chinese group HNA and Sir Richard Branson's Virgin Group as an investor in the Australian carrier's complicated register.
Nanshan has bought the stake for 33&cent; a share, a premium to the 30&cent; a share price paid by HNA to take a 13 per cent stake in Virgin in a share placement last week. The share placement remains subject to Chinese regulatory approval, but Virgin has announced its intention to build its stake to 19.9 per cent over time. The Nanshan purchase of the Air New Zealand stake also remains subject to regulatory approval. 
Virgin has agreed to give HNA a board seat and on Friday, the Australian carrier said it understood Nanshan would put forward a nomination for a board representative, which it would consider in line with its policies and procedures.
"We look forward to meeting with Nanshan Group over the coming weeks to discuss the proposed acquisition," Virgin said in a statement.
Air New Zealand placed its 25.9 per cent stake in Virgin up for sale in   March after its chief executive, Christopher Luxon, pushed unsuccessfully for other board members to join him in an effort to oust Virgin boss John Borghetti. Mr Luxon stepped down from the Virgin board and appointed First NZ Capital and Credit Suisse to help market the stake to potential buyers, which also included HNA, China Southern, Cathay Pacific and Singapore Airlines.
Air New Zealand had participated alongside Singapore Airlines, Etihad and Virgin Group in extending a $425 million loan to Virgin in   March at a time when the Australian carrier needed to fix its balance sheet. Virgin, advised by UBS, is expected to proceed with a capital raising of up to $800 million as early as this month.
Mr Luxon last week expressed confidence that Air New Zealand would be able to sell all or part of its stake in Virgin by   June 30 despite Virgin agreeing the HNA deal without consulting the Kiwi carrier. Air New Zealand is expected to use the proceeds from the sale to pay a special dividend to its shareholders, which include the New Zealand government with a 53 per cent stake.
Air New Zealand shares were trading NZ6.5&cent;, or 3 per cent, higher at $NZ2.235 in New Zealand at 9:20am AEST on Friday.
The deal with Nanshan was signed in Auckland in the early hours of Friday morning after initial negotiations in Sydney during the week. Nanshan was advised by Gresham Partners and industry sources said Virgin had been aware of its interest in the stake over the last fortnight and would be meeting with the Chinese group in the coming weeks.
"We believe Nanshan Group will be a very strong, positive and complimentary shareholder for Virgin Australia," Air New Zealand chairman Tony Carter said. "The sale will allow Air New Zealand to focus on its own growth opportunities, while still continuing its long-standing alliance with Virgin Australia on the trans-Tasman network".
Nanshan is a large privately owned Chinese conglomerate which owns a small airline in China, Qingdao Airlines, along with interests in sectors spanning aluminium, agriculture, education and property. It has some other interests in Australia, including the Riverside Oaks golf course and the Pullman Sydney Airport hotel, which it purchased last year for $84 million. Nanshan also purchases bauxite from Rio Tinto for its aluminium production.
Air New Zealand said Nanshan intended to support the outcome of Virgin's capital structure review, which is expected to result in an equity raising. The Kiwi carrier added options regarding its remaining shareholding would be considered in "due course".
Air New Zealand had purchased its stake in Virgin for around $NZ480 million ($459 million) according to calculations by Deutsche Bank, meaning it will be selling at a loss.