Pacific Equity Partners’ second attempt to acquire a stake in Flight Centre, an Australia-listed travel agency, in a deal that values the business at A$1.6 billion has been scuppered a second time.
This time, the founding management – who had supported Pacific Equity Partners in the first attempt to ake the company private – has rejected the transaction.
Under revised terms, Pacific Equity Partners would buy a 30 percent interest in a leveraged joint venture platform to be formed to acquire Flight Centre’s operational assets. Flight Centre was to remain a public company.
In the latest twist of events, Flight Centre has terminated the implementation deed it entered into on 21 June.
The company founder shareholders who account for more than a 50 percent interest have “formed a final intention to vote against any resolution to approve the transaction.”
The decision to pull out of a deal with Pacific Equity Partners follows an independent expert report by Ernst & Young, which valued Flight Centre at A$1.9 billion to A$2 billion.
It concluded the proposed transaction was “neither fair nor reasonable based on an analysis of FLT’s performance for the year to June 30 2007” according to a statement filed with the exchange.
Cost and tax considerations were also cited as major concern if the transaction proceeded.
Bruce Brown, chairman of Flight Centre said: “While the creation of a leveraged joint venture had the potential to deliver significant benefits to FLT and its shareholders, it was also a highly complex and costly transaction and the value proposition has become considerably less attractive for shareholders as a clearer picture of the costs of the transaction has emerged.”
Pacific Equity Partners, which appears to have been caught off-guard by the latest developments initiated by Flight Centre refers to the latter’s assertions as “inconsistent with recent discussions (with the company).”
“PEP wishes to verify these matters and the position attributed to the founders by the independent directors before deciding on next steps.”