More firms could join bid to buy Qantas
More private equity firms expressed interest in joining a bid for Australia’s Qantas Airways Ltd. on Thursday, the day after plans for an audacious takeover were confirmed.
But political and legal hurdles facing the massive buyout -- priced by analysts at as much as 11 billion Australian dollars, ($8.5 billion) -- also emerged, as the government promised that no changes would be made to laws barring the airline’s sale into foreign control.
“The Flying Kangaroo says Australia, and as far as I’m concerned that means majority Australian ownership,” Treasurer Peter Costello told reporters, referring to the logo painted on the company’s 200-plus planes.
Qantas’ stock soared to a seven-year high Wednesday after the airline revealed that it had been approached by a consortium represented by Macquarie Bank, Australia’s biggest securities firm, and Forth Worth-based Texas Pacific Group.
Few details have been released by either side. Qantas said that the approach was incomplete and that it was investigating. Macquarie described it as indicative talks.
On Thursday, Sydney-based Allco Finance Group said it might join the consortium if it went after Qantas.
“In relation to the participation in the consortium, Allco advises that it is currently considering its participation in the indicative proposal,” Allco said in a statement.
Separately Thursday, Allco Executive Chairman David Coe said the company already had plans to raise $386.5 million to fund overseas expansion and repay debt, and this money could be used for Qantas.
Dow Jones Newswires, citing an unnamed person it said was familiar with the situation, reported that Sydney-based Pacific Equity Partners was also considering joining Macquarie in the bid. The company was not immediately available for comment.
Qantas shares traded on the Australian Stock Exchange rose 15% on Wednesday but fell by 1.4% on Thursday, as local debate about the deal centered around whether the iconic 87-year-old airline should be allowed into foreign hands.
Analysts expect that the bid will represent a 12% premium to Thursday’s closing share price.
Some government lawmakers have joined the opposition Labor Party in expressing concerns that even if the deal stays within the existing law, Qantas’ assets could be broken and sold into foreign hands.
Potential job cuts by any new owner is another sensitive political issue.
“The politicians are raising a few doubts about the takeover,” said Margaret Morrissey, an advisor at Brisbane, Australia-based ABN Amro Morgan Ltd. “They are worried about the assets being stripped and sent offshore.”
Legislation that passed when the government sold the airline in 1995 bars any one stakeholder from holding more than 25% of the company and caps foreign ownership at 49%.
Under the law, Qantas’ headquarters must remain in Australia, two-thirds of the company’s directors must be Australian citizens and the chairman must be an Australian citizen.
The Macquarie-led deal could also face conflict of interest troubles because the bank is the majority owner of Sydney Airport. Analysts said regulators could consider it anti-competitive if Macquarie held large stakes in both Australia’s largest airport and the airport’s largest customer.
The Australian Competition and Consumer Commission, a fair trade watchdog group, said it was monitoring the Qantas takeover talks and might review any bid that emerges.
