Going, going, gone – Jackson does the deal – Qantas goes private

In a hastily called Press Conference this morning, which was delayed while the ASX was informed, Qantas’ Chairman Margaret Jackson announced that as a result of detailed negotiations yesterday after the Qantas Board rejection of the initial offer, the Qantas Board had received a revised proposal from Airline Partners Australia (APA) to acquire 100 percent of the Company for $5.60 cash per share.

Ms Jackson said the revised proposal provided an attractive premium for Qantas shareholders, being 33% percent higher than the closing share price of $4.20 on 6 November 2006, the day before the first speculation about the offer and 61% percent above Qantas’ volume weighted average share price of $3.48 over the six months to that date.

Ms Jackson said that, on what was a momentous and exciting day for Qantas, subject to receiving an opinion by independent expert Grant Samuel that the offer is fair and reasonable, Qantas Non-Executive Directors unanimously intend to recommend that shareholders accept the offer in the absence of a superior proposal, and all Directors intend to accept in respect of their own shareholdings.

She said, “The Directors believe this offer allows Qantas shareholders to realise significant value for their shares that has not been fully recognised in the public market.”

She also thanked all the Qantas staff which embodied the strength of the company and that she would only want Qantas owned by others why had the same level of care for the airline as the current Board and Management team had.

The proposal will be implemented by way of an off-market takeover bid, which will be subject to certain conditions including a 90% minimum acceptance condition.

Ms Jackson added that said the revised proposal followed negotiations with APA since the Board’s rejection yesterday of its initial proposal and that these negotiations had resulted in the removal of unacceptable conditions including the substantial break fee as well as an increase in the price from $5.50 to $5.60 per share.

She also added that under the terms of the offer, the interim dividend that would otherwise be payable in April 2007 will not be available, however, the Board is evaluating whether a fully franked special dividend could be paid during the bid period, in which case the offer consideration would be reduced by the dividend amount.

Ms Jackson said, “Following the Directors’ decision, Qantas this morning executed an Implementation Deed with APA and its members to progress the offer.”

Bob Mansfield representing APA which consists of the following investors, Allco Equity Partners, Allco Finance Group, Macquarie Bank, TPG, Onex and other foreign investment funds confirmed that the proposal involves Qantas transitioning to a privately owned company and de-listing from the Australian Securities Exchange, that Qantas would remain majority owned and controlled by Australians and that the retention of the current management team with Geoff Dixon as CEO was critical and that they will invest in the privately owned company.

He also said that they offered “patient capital”, which was happy to wait for a return on their investment and that they anticipated their ownership as was normal in cases of this nature would be for between five or ten years.

Geoff Dixon confirmed to The Mole that he had committed to continue as Chief Executive Officer for at least three years with two year options after that and that Peter Gregg would remain Chief Financial Officer under the new ownership structure.

Ms Jackson said that the consortium had expressed its support for core Qantas strategies,, which would not change, including, maintaining an extensive domestic and international airline network, using Qantas’ two-brand (Qantas and Jetstar) strategy, continuing Qantas’ commitment to high quality product and service, and improving the company’s cost base to be globally competitive.

She added, “If this acquisition is successful, Qantas will remain a majority Australian-owned, Australia-based airline and the foreign-based Consortium members are experienced airline investors with a long-standing association with the industry”.

“The Consortium members have made it clear to us that they recognise the immense value of the Qantas brand and intend to improve it and grow the business.”

“If this bid succeeds, Qantas will continue to play a vital role as Australia’s national carrier.”

Ms Jackson said that this was a momentous day for Qantas in its history.

The Board’s formal response will be provided in a Target statement that is expected to be mailed to all shareholders by early February 2007 and UBS, Carnegie, Wylie & Company and Allens Arthur Robinson are advising the Non-Executive Directors of Qantas.

Report by The Mole