Qantas bidders move on airline


Summary

A consortium bidding for Qantas has restructured its offer and told the airline's shareholders it is now time to make a decision on the takeover.

Airline Partners Australia (APA) says it has lowered the minimum shareholder acceptance condition to 70 per cent, from 90 per cent.

The easing of the condition will make it easier to get the offer over the line, after some institutional investors took strategic stakes in Qantas and indicated they could block the deal.

But APA also warned the carrier's debt would rise on the back of a plan to reduce Qantas' capital by $4 point 5 billion that would be funded by debt.

APA director Bob Mansfield said it was time for Qantas shareholders to make a decision on the $5 point 45 cash bid.

"In our view investors have had ample time to assess our offer," Mr Mansfield said.

"It is now time for Qantas shareholders to act."

He said APA was concerned that many shareholders were discouraged from accepting the offer because of opposition from a small number of "vocal" shareholders.

"By effectively lowering that condition to 70 per cent, shareholders can be confident that the offer will be successful," he said.

The decision to lower the threshold follows weeks of uncertainty after Qantas four per cent stakeholder Balanced Equity Management said it would reject the offer.

That declaration, combined with expectations that UBS Global Asset Management might use its stake to also reject the bid, led to concerns APA would be unable to fulfil its 90 per cent acceptance condition, delist Qantas and take full ownership.

Under the changes announced today, Qantas could remain listed although APA said it remained keen to acquire all of its shares.

APA currently has acceptances representing 30 per cent of Qantas stock and is expected to gather a further 40 per cent held by hedge funds.

Mr Mansfield said he did not know what UBS intended to do in relation to its Qantas holding.

"UBS hasn't indicated anything to us," he told journalists.

"The negatives I have outlined … will worry some shareholders and they will move away from the register."

He noted that if APA does acquire 70 per cent of Qantas it would be removed from major indices, making the stock less attractive to fund managers.

Mr Mansfield today also warned shareholders that Qantas was facing a number of "serious competitive threats" from the expansion plans other airlines such as Virgin Blue, Emirates and Etihad.

"APA firmly believes that in the current environment of increasing competition, the APA offer continues to represent an attractive offer," he said.

Qantas already plans to expand its aircraft fleet to increase its domestic capacity by 14 per cent and spend $13 billion on new aircraft in the next few years.

Qantas today reiterated that its non-executive directors recommend the APA offer.

Meanwhile, APA's financiers have agreed to provide it with a new funding facility that can be activated if it receives acceptances for more than 70 per cent of Qantas, but less than 90 per cent.

It means APA keeps its 'covenant-lite' financing package to fund the takeover.

But it does change other aspects of the financing deal with the result that Qantas may take on more debt.

With the airline likely to remain listed, APA's loans will be secured against Qantas shares rather than hard assets.

Shaw Stockbroking aviation analyst Brent Mitchell said the airline's borrowings would be fed through to shareholders as dividends, to service APA's debt.

"They will significantly increase funding from borrowing and within the group, some of that will go to distributions, otherwise there's no way of servicing the debt," Mr Mitchell said.

The consortium reiterated that its total offer of $5.60 per share, after including a special 15 cents dividend paid by Qantas, was a full one.

The transaction has been described as fair and reasonable by an independent expert and has achieved the necessary regulatory clearances.

The closing date of the offer was extended by 14 days to May 4.

Qantas shares ended today up eight cents at $5.39.

Led by Macquarie Bank Ltd, APA also comprises Allco Finance Group Ltd and Allco Equity Partners Ltd of Australia, US private equity giant Texas Pacific Group and Canada's Onex Group.


A consortium bidding for Qantas has restructured its offer and told the airline's shareholders it is now time to make a decision on the takeover.

Airline Partners Australia (APA) says it has lowered the minimum shareholder acceptance condition to 70 per cent, from 90 per cent.

The easing of the condition will make it easier to get the offer over the line, after some institutional investors took strategic stakes in Qantas and indicated they could block the deal.

But APA also warned the carrier's debt would rise on the back of a plan to reduce Qantas' capital by $4 point 5 billion that would be funded by debt.

APA director Bob Mansfield said it was time for Qantas shareholders to make a decision on the $5 point 45 cash bid.

"In our view investors have had ample time to assess our offer," Mr Mansfield said.

"It is now time for Qantas shareholders to act."

He said APA was concerned that many shareholders were discouraged from accepting the offer because of opposition from a small number of "vocal" shareholders.

"By effectively lowering that condition to 70 per cent, shareholders can be confident that the offer will be successful," he said.

The decision to lower the threshold follows weeks of uncertainty after Qantas four per cent stakeholder Balanced Equity Management said it would reject the offer.

That declaration, combined with expectations that UBS Global Asset Management might use its stake to also reject the bid, led to concerns APA would be unable to fulfil its 90 per cent acceptance condition, delist Qantas and take full ownership.

Under the changes announced today, Qantas could remain listed although APA said it remained keen to acquire all of its shares.

APA currently has acceptances representing 30 per cent of Qantas stock and is expected to gather a further 40 per cent held by hedge funds.

Mr Mansfield said he did not know what UBS intended to do in relation to its Qantas holding.

"UBS hasn't indicated anything to us," he told journalists.

"The negatives I have outlined … will worry some shareholders and they will move away from the register."

He noted that if APA does acquire 70 per cent of Qantas it would be removed from major indices, making the stock less attractive to fund managers.

Mr Mansfield today also warned shareholders that Qantas was facing a number of "serious competitive threats" from the expansion plans other airlines such as Virgin Blue, Emirates and Etihad.

"APA firmly believes that in the current environment of increasing competition, the APA offer continues to represent an attractive offer," he said.

Qantas already plans to expand its aircraft fleet to increase its domestic capacity by 14 per cent and spend $13 billion on new aircraft in the next few years.

Qantas today reiterated that its non-executive directors recommend the APA offer.

Meanwhile, APA's financiers have agreed to provide it with a new funding facility that can be activated if it receives acceptances for more than 70 per cent of Qantas, but less than 90 per cent.

It means APA keeps its 'covenant-lite' financing package to fund the takeover.

But it does change other aspects of the financing deal with the result that Qantas may take on more debt.

With the airline likely to remain listed, APA's loans will be secured against Qantas shares rather than hard assets.

Shaw Stockbroking aviation analyst Brent Mitchell said the airline's borrowings would be fed through to shareholders as dividends, to service APA's debt.

"They will significantly increase funding from borrowing and within the group, some of that will go to distributions, otherwise there's no way of servicing the debt," Mr Mitchell said.

The consortium reiterated that its total offer of $5.60 per share, after including a special 15 cents dividend paid by Qantas, was a full one.

The transaction has been described as fair and reasonable by an independent expert and has achieved the necessary regulatory clearances.

The closing date of the offer was extended by 14 days to May 4.

Qantas shares ended today up eight cents at $5.39.

Led by Macquarie Bank Ltd, APA also comprises Allco Finance Group Ltd and Allco Equity Partners Ltd of Australia, US private equity giant Texas Pacific Group and Canada's Onex Group.