Pacific Equity Partners $1.3bn MBO attempt fails

As expected, Pacific Equity Partners and the co-founders of Australia’s Flight Centre failed to receive enough shareholder support to take the listed travel agency private, after its largest shareholder voted against the deal.

Pacific Equity Partners, a Sydney-based private equity firm, failed to garner enough support today for its A$1.62 billion ($1.28 billion) take-private bid for listed Australian travel agent Flight Centre, after the company’s fourth largest shareholder decided to block the deal.

Haydn Long, a spokesman for Flight Centre, confirmed the proposed management buyout had failed to receive the necessary 75 percent shareholder support in today’s vote.

The negative outcome came as no surprise to the private equity firm, which yesterday expressed its disappointment at the “likely unsuccessful outcome of a privatisation proposal for Flight Centre”.

In a statement entitled “PEP to remain disciplined on value,” the buyout firm said the A$17.20-per-share offer is “a highly attractive offer at a price that has been accepted in proxy voting by around 90 percent of Flight Centre’s investors.”

However, despite an independent expert report in January recommending that shareholders accept the take-private proposal, PEP’s bid failed to receive enough support at today’s meeting, according to a stock exchange filing.

“Only one investor has caused the issue and that’s Lazard, which has a blocking stake,’’ Graham Turner, chief executive officer of Flight Centre told Bloomberg in an interview. “The rationale, at least officially, is that the offer wasn’t high enough.”

Lazard Asset Management, which did not back the offer, controls more than 25 percent of the shares that were eligible to vote today.

Flight Centre’s shares, which closed at A$16.89 on 26 February, were suspended from trading yesterday but will resume trading tomorrow.