Qantas buyout back on(2)

The potential A$11billion buyout of Qantas, Australia’s biggest airline, looked to be back on today, after the Macquarie-led consortium restructured its deal to require a lower level of shareholder acceptance. Opposition from leading shareholders had looked likely to scupper the bid.

The buyout consortium circling Qantas appears to have resurrected the chances of completing an A$11 billion (€6.8 billion; $9.1 billion) deal for Australia’s biggest airline, after agreeing a new financing structure with bankers that will require a lower level of shareholder acceptance.

Qantas – back on?

The deal had looked doomed to failure after some of Qantas’ biggest shareholders came out against the deal, making it almost impossible for the consortium to secure the required 90 percent level of shareholder acceptances.

However the Airline Partners Australia consortium, which includes Australian groups Macquarie and Allco Finance along with US buyout firm TPG, has agreed a new funding package with the team of banks financing the bid. As a result, the deal will only need to be accepted by shareholders representing 70 percent of the issued share capital.

APA, which currently has acceptances from about 30 percent of shareholders, has also extended its A$5.45 per share cash bid until May 4, to give the remaining shareholders time to accept. Director Bob Mansfield said in a statement: “APA is concerned that many Qantas shareholders have become discouraged from accepting the offer in the belief that the opposition to the offer from a small number of vocal shareholders may prevent us reaching the 90 per cent acceptance condition.”

Balanced Equity Management, an Australian fund manager with a four percent stake, has already publicly opposed the deal. UBS, which holds about eight percent, is also believed to be against the bid, although it has yet to show its hand publicly.

Mansfield defended the consortium against criticism that their bid undervalues the airline. Qantas faced “serious competitive threats” from airlines like Virgin Blue, he said, and this had been factored into the bid pricing.

The consortium also said that if the deal goes through, it will propose that Qantas “significantly increase its borrowings”, in order to pay out a special dividend to shareholders.

Investors welcomed the news, with Qantas shares closing at $5.39 today, up eight cents.