APA’s last call for Qantas

Steve Creedy in the Australian says that the private equity consortium attempting to take control of Qantas has made a last-ditch effort to pressure shareholders into accepting its $11.1 billion bid for the national carrier by announcing it will not extend the deal’s May 4 closing date.

With acceptance levels falling last week from just over 30% to 27.48% Airline Partners Australia yesterday issued a “trigger statement” designed to put the faltering bid in the final make-or-break stretch of its four-month race.

The consortium is hoping the high-risk move and a decision to make payments five days after the offer becomes unconditional will convince shareholders waiting until the last minute, or pulling their acceptances to sell on-market, to accept its $5.45-per-share bid.

It also announced it would allow all shareholders to withdraw their acceptance at any time before the offer was declared unconditional, a move sources say is designed to give investors comfort that they are not locked out of alternative investment opportunities.

However, the May 4 closure date might not be absolutely final with takeover legislation allowing for an automatic statutory extension of 14 days if APA’s voting power exceeds 50% before the cut-off date.

The 50% threshold only counts “hard” acceptances and does not include instructions held under the institutional acceptance facility not accompanied by a confirmation letter.

The consortium partners are hopeful they will get enough hard acceptances to trigger the extension, despite the fact the number of shares in which they actually held a relevant interest had crept up to just 12.27% by Friday.

A failure to reach the threshold would see the bid fail on May 4.

Sources close to the deal said one outcome of exceeding it would be to allow APA to modify minimum acceptance conditions and take the offer unconditional at a lower level.

APA had already dropped the minimum acceptance level for its bid from 90% to 70%  in the face of opposition by funds who believe the $5.45 per share offer is not enough in light of the current strong aviation market.

APA spokesman Bob Mansfield said yesterday that the consortium believed shareholders had had ample time to assess the offer.  He said the accelerated payments should be attractive to all investors and provide an incentive to shareholders to accept quickly, adding, “APA is aware that the overwhelming majority of small and large Qantas shareholders support the offer”. “Now is the time for those supportive shareholders to accept.”  “If the bid fails the share price will almost certainly fall.”

BBY analyst Fabian Babich said it was clear that APA wanted to bring the offer to a head, remove any uncertainties and “get it done”.

Mr Babich said the accelerated payments would provide an additional incentive for shareholders to accept, adding, “That would be particularly attractive, obviously, to the hedge funds who are playing the arbitrage games”.

The APA move comes after pressure from the Qantas board and workers to bring the deal to a head.

The Board said in a supplementary target’s statement last week that the deal should be finalised “in the interests of all Qantas shareholders”.

Failure would put the Board, particularly Chairman Margaret Jackson, in an uncomfortable position after its strong endorsement of the bid.

Report by The Mole from The Australian