Private Equity News & Analysis

Qantas buyout hopes grounded

The Australian airline has rejected a A$10.9bn offer from a consortium including several private equity firms.

-

Qantas has rejected a A$10.9 billion ($8.6 billion) bid from a consortium including Allco Equity Partners, Allco Finance, Macquarie Bank, Onex Corp and Texas Pacific Group. It is not known whether the consortium will propose a revised bid or walk away from negotiations. 

In a statement announcing the rejection of the offer on its website, Qantas highlighted conditions attaching to the bid. It said: “The proposed offer price is A$5.50 per share and incorporates a number of complex conditions, the requirement for unanimous support by Qantas directors and a break fee. Implementation is proposed to be effected by way of an off-market takeover bid with a 90% minimum acceptance condition. The non-executive directors consider that the terms of the proposal are not acceptable.”

On news of the rejection, Qantas shares fell 2.7 percent on the Sydney Stock Exchange to close at A$5.09, having reached a low of A$4.93. The price offered by the consortium was 26 percent higher than Qantas’ share price on November 21, when it said it had been approached.

At the beginning of December, Qantas issued a bullish forecast of a 30 percent rise in pre-tax profits in 2007. This led to speculation that the consortium would need to increase its offer to succeed. While some market observers are interpreting the rejected bid as merely an opening gambit, others say that a takeover has now become much less likely.

Further details of the proposed bid emerged today. Bloomberg reported that Australian private equity firm Allco Equity Partners was in line for a 34 percent stake, while its subsidiary Allco Finance – an investor in shipping, property and aircraft leasing – was to take 11 percent. Meanwhile, Macquarie Bank was keeping its stake at less than 15 percent to avoid competition concerns relating to its existing shareholding in Sydney airport. Private equity firms Texas Pacific of the US and Canada’s Onex Corp would have held less than 40 percent between them.

Qantas becomes the second attempted Australian mega-deal to falter in recent months. In September, an eight-strong private equity consortium that included Macquarie Bank and Texas Pacific affiliate TPG-Newbridge had a A$17.4 billion ($13.3 billion) offer for retailer Coles Myer turned down.