By Joyce Moullakis, Bloomberg
Sydney: Macquarie Bank Ltd. and TPG Inc. said they may resubmit an $9.1 billion (Rs36,946 crore) bid for Qantas Airways Ltd. to keep the world’s biggest airline takeover alive.
The bidders might again offer A$5.45 a share in cash, Sydney-based Macquarie Bank said today. The original bid lapsed after they failed to get the required 50% of acceptances until several hours after the deadline passed on 4 May. Shares in Qantas, Australia’s biggest airline, were halted from trading today after closing at A$5.38 on 4 May.
The buyout group wants to take control of Qantas as the airline enters its 14th straight year of profit growth. Australia’s takeovers and securities regulators ruled late acceptances for the six-month-old bid were invalid.
“They’ve put in a lot of time and money already, so it’s only a marginal effort for them to continue,” said Hans Kunnen, who helps manage the equivalent of $111 billion, including Qantas and Macquarie shares, at Colonial First State Investment Management Australia Ltd. in Sydney. “The risk is they’ll dig their hole twice as deep.”
The Takeovers Panel said it won’t start proceedings to review a decision to disallow a late acceptance after the 7 p.m. deadline in Sydney. The buyout group today argued it may have reached 50% before the offer closed. It said a clause in Australia’s Corporations Act may allow it to count all of an investor’s holding, regardless of how much was tendered.
“I think it shows a bit of desperation,” said Michael Adams, professor of corporate law at the University of Western Sydney. “Under basic contract principles, it’s unreasonable to coerce shareholders to sell their entire holding.”
The group needed at least 50% of Qantas stock to trigger an automatic 14-day extension of its offer.
The late acceptance lifted the buyout group’s stake to 50.6%. Macquarie and its partners also made getting 70% of Qantas stock a condition of their bid. They raised the offer once and eased the terms three times to win investor support.
The buyout group is “exploring a number of alternatives,” according to today’s statement. Melbourne-based Allco Equity Partners, Allco Finance Group and Onex Corp., are also members of the bidding group.
Macquarie today also made a new takeover offer for Alinta Ltd., Australia’s biggest energy transmission company, as it seeks to win its two biggest pending takeovers. The bank made a bid for Perth, West Australia-based Alinta to trump an agreed A$7.4 billion agreed offer by Babcock & Brown Ltd. and Singapore Power Ltd. The bank hasn’t disclosed details of its offer.
‘Strategies And Plans’
The Qantas buyout offer failed because it didn’t receive the 50% stake required in time, the airline’s board said. “Qantas will proceed with strategies and plans for its future,” the company said.
Qantas stock has surged 24% since the company said on 22 November it had been approached by Macquarie, Australia’s biggest investment bank. Macquarie and its partners had declared the bid for Qantas final, preventing them raising their price under Australian takeover law.
The Qantas offer started to run into resistance in March when Melbourne-based fund manager Balanced Equity Management said it wouldn’t sell its 4% stake and the Australian Financial Review reported UBS Global Asset Management wouldn’t accept the bid for its 6% stake.
A revised bid for Qantas may not receive the support of the airline’s board or shareholders, due to the “protracted nature” and failure of the original offer, Paul Ryan an analyst at Goldman Sachs JBWere said in a note to clients today.
Investors turned against the offer after Qantas forecast pretax profit may almost double to A$1.23 billion in fiscal 2008, from A$671 million in the 12 months ended on 30 June 2006, as jet fuel prices fall and it carries more passengers.
Balanced Equity’s MD Andrew Sisson told Australian Broadcasting Corp. the offer was about a dollar too low.
“It’s a lucrative deal for them and they obviously still think they can get it through,” Craig Young, who helps manage $3.7 billion at Tyndall Investment Management in Sydney, including Macquarie shares. “Shareholders are holding out longer now than they did in the past.”
Investor resistance to takeovers on Australia has increased this year, with many citing limited new investment opportunities.
In April, Tony O’Reilly’s Independent News & Media Plc increased its bid for APN News & Media Ltd. to win shareholder support, even though the board had recommended a lower offer.
The board of Flight Centre Ltd., Australia’s biggest travel agency, is considering a new proposal after a A$1.6 billion management buyout was blocked by Lazard Asset Management in February.
Macquarie stands to earn A$130 million in merger and advisory fees from the Qantas buyout, and more if the group divests of assets, according to analysts including Brian Johnson at JPMorgan Chase & Co in Sydney.