Qantas agrees A$11.1bn takeover

Australian airline Qantas has accepted a revised A$11.1bn offer from a private equity consortium a day after rejecting a A$10.9bn bid.

Qantas, the Australian airline, has accepted a revised A$11.1 billion (€6.6 billion; $8.7 billion) bid from Airline Partners Australia, a consortium including Allco Equity Partners, Allco Finance, Macquarie Bank, Onex Corp and Texas Pacific Group. The successful A$5.60 per share offer follows yesterday’s rejected A$5.50 per share bid.

Qantas:deal takes off for A$11.1 billion

Following yesterday’s rejected offer, Qantas referred in a statement to “a number of complex conditions” including a break fee. A report in today’s Financial Times said that the consortium is “understood” to have dropped the demand for a break fee thought to be worth A$100 million. This would in theory leave Qantas open to rival approaches.     

The deal, Australia’s largest LBO to date, will leave the majority of Qantas in domestic hands. Australian private equity firm Allco Equity Partners will hold 35 percent and its asset finance subsidiary Allco Finance will have 11 percent. Macquarie Bank will take less than 15 percent in a move designed to avoid competition concerns relating to its existing shareholding in Sydney airport.

Foreign members of the consortium are acquiring modestly sized stakes in the hope of circumventing Australia’s tight foreign ownership rules. US private equity firm Texas Pacific Group says it will acquire less than 15 percent, while Onex Corp of Canada is taking 9 percent. A further stake of less than 15 percent has been set aside for as-yet unnamed foreign investors.

The Qantas bid has aroused some heated debate, not least from airline union officials who have questioned foreign private equity firms’ motives. A statement from the Airline Partners consortium today emphasised its long-term commitment to Qantas, including a pledge to invest more than A$10 billion over the next five years and to “maintain Qantas’ world leading maintenance and safety record”.

The same statement also stressed the airline sector experience of the consortium members. Allco Finance is a long-term leaser of aircraft to international airlines and has had a 25-year relationship with Qantas; Texas Pacific has invested in Continental Airlines, America West Airlines and Ryanair; Onex has invested in airplane assembly firm Spirit Aerosystems and in-flight caterer Sky Chefs; while Macquarie Bank owns aircraft, owns/manages six airports and has an aircraft and engine leasing arm.