Company Watch - Qantas

Dec 18, 2006

Qantas Bid Sparks Competition Concerns. The AUD$11.1 billion (USD$$8.7 billion) buyout of Qantas Airways might run into turbulence after Australia's Treasurer raised concern about Macquarie Bank having a stake in the airline and in airport interests. Australia's competition regulator said on Friday it had started a review of the offer for Qantas from a group led by Macquarie and private equity firm Texas Pacific Group. Dec 15, 2006

Qantas CEO Geoff Dixon, who will retain his position along with other members of the management team, yesterday did his part to mollify public concern over the transition facing Australia's national airline. He said in a statement that the entirety of the Long-Term Incentive Scheme prepared for him by APA, which will be performance and time-based and could be worth as much as A$60 million if Qantas achieves a 25% annual return for five years, will be donated to a charitable trust "for the benefit of the community, particularly in the areas of medical research and indigenous health and education." Dec 15, 2006

Qantas's board agreed to a sweetened AUD$5.60 a share offer for Australia's flag carrier on Thursday. The offer is expected to go to shareholders in late January. Qantas shares traded at AUD$5.30 on Friday, 5 percent below the offer price, indicating investors did not expect a higher bid to emerge. Dec 15, 2006

There is turbulence ahead for Qantas, with News Corp.'s influential The Australian calling on the government to open up access to all Qantas routes in the wake of the airline's Wednesday acceptance of an A$11.1 billion ($8.74 billion) takeover bid from the Airline Partners Australia consortium. In an editorial, the newspaper said the government should "completely deregulate access to Australian skies and force Qantas to compete to service air travelers and tourism operators against all comers on all routes." Other headlines cautioned that the carrier will have fewer friends in government, and ministers are warning Qantas not to cut jobs, particularly with a federal election late next year. Dec 15, 2006

Former Cathay Pacific Airways CEO David Turnbull, executive director of APA member Allco Finance Group, told Bloomberg News in Sydney that there is no reason for the government to change policy. The fundamental change will come if, as expected by most observers, the new owners start to break up the airline and move jobs offshore. APA said it supports core Qantas strategies, including maintenance of an extensive domestic and international network and the use of both the Qantas and Jetstar brands. But the latter also is a catalyst for significant industrial strife, as Qantas staff believe the company will move significantly more business to the low-cost Jetstar operation, a prospect that will gain even more momentum with the huge debt level accompanying APA's bid. The Qantas board late Wednesday accepted a revised proposal from APA to acquire 100% of the airline for A$5.60 cash per share. Dec 15, 2006

An issue for Qantas is whether politicians will be less willing to continue protecting Qantas from competition on the lucrative route between Australia and the United States once it is taken over by the new owners. Prime Minister John Howard reiterated his view on Friday that the Australian government has given Qantas less protection than the Singapore government gives to Singapore Airlines, the airline that has been pressing for rights to fly from Australia to the United States. The Australian Competition and Consumer Commission invited interested parties to give submissions by January 29. Macquarie has restricted its economic and voting stake in the consortium to less than 15 percent to try to ensure it avoids any conflict of interest with its stakes in airports, including Sydney Airport, through Macquarie Airports. Others in the Airline Partners Australia bidding consortium are Allco Equity Partners, Allco Finance, Canadian investment firm Onex and other foreign investors. Their economic stakes in the consortium are different from their voting stakes, which Costello said he wanted to study carefully.

Dec 15, 2006

Following its rejection of the initial takeover bid early yesterday, the Qantas board last night unanimously accepted a revised and higher offer from Airline Partners Australia, the consortium led by Australia's Macquarie Bank and Texas Pacific Group of the US. In a filing with the Australian Securities Exchange, Qantas Chairman Margaret Jackson said APA's A$5.60-per-share cash offer "allows Qantas shareholders to realize significant value for their shares that has not been fully recognized in the public market." Dec 14, 2006

Qantas Accepts USD$8.7 Billion Takeover Offer. Australia's Qantas Airways agreed to a sweetened AUD$11.1 billion (USD$8.7 billion) buyout offer led by Macquarie Bank and private equity firm Texas Pacific Group after the bidders dropped a break fee, sources said on Thursday. The sale of the national icon, dubbed the flying kangaroo, has stirred national sentiment and reached the highest levels of Australian politics, prompting the bidding group to stress that the airline would remain majority Australian owned. However, Prime Minister John Howard signaled the government was unlikely to interfere in any change of hands of the airline, founded 86 years ago in outback Queensland as an air taxi service. The offer of AUD$5.60 a share, 10 percent above Qantas's last trade on Wednesday, was unanimously endorsed by the Qantas board after the bidders dropped a demand for a break fee and simplified other conditions. The board rejected an offer of AUD$5.50 on Wednesday. Dec 14, 2006