Qantas Airways gets $7.8-billion buyout bid

Australia’s Qantas Airways Ltd. has received a buyout offer from investment firms Macquarie Bank and Texas Pacific Group that could be worth more than $7.8 billion. The bid sent shares surging 25%.

“The approach is confidential and incomplete and is being investigated by Qantas,” the airline said in a statement, after a newspaper reported that a Macquarie-led buyout possibly worth $8 billion was in the works.

A deal, which could rival US Airways Group Inc.’s $8-billion bid for Delta Air Lines, would mark a change in strategy by private equity groups that had been hunting for cash-rich retail and media assets in Australia.

However, private equity firm Texas Pacific has always chased airlines.

Its first deal was the rescue of Continental Airlines in 1993. It has held stakes in the former America West and Ireland’s Ryanair and has previously bid for stakes in Air Canada and South African Airways.

Investment bank Macquarie has chased numerous targets in the last year, including top Australian ports group Patrick Corp. and the London Stock Exchange.

A Qantas spokesman could add nothing further to its statement, and Macquarie declined to comment.

Qantas shares soared 25%, or 80 cents, to close at $3.95 in over-the-counter trading.

The cost of debt default protection on the Australian airline rose sharply on the news.

Ratings company Standard & Poor’s placed Qantas’ BBB-plus credit rating on negative CreditWatch on expectations that any buyout could be heavily debt-financed.

The deal would involve Macquarie and associates taking a 25% stake in Qantas, other Australian investors taking 25%, Qantas senior management 1% and international players led by Texas Pacific taking the rest, the Australian Financial Review newspaper said, citing unnamed sources.

That mix would allow the consortium to get around ownership restrictions that limit one individual entity to no more than 25% of the airline, and international interests collectively owning no more that 49%.