Post Qantas offer blues or has reality set in?

After the release of the news that Macquarie Bank and its US based partner Texas Pacific and Pacific Equity Partner’s are bidding to buy Qantas, the initial share prices euphoria surge was very short lived, turning into a dive as nationalistic sentiment stepped in wpossibly stopping the possible $A10 billion buyout by a group of international investors.

[pictured – do Aussies want the Flying Kanagroo to hop off overseas?  Let The Mole have your views]

The pollies and the unions let rip, rightly or wrongly, with the Government having the final say on any buyout facing a national election next year, very well aware what the wrong decision, whatever that may be, could mean for them.

The Australian Manufacturing Workers Union, the largest union representing Qantas workers, kicked in, warning that overseas and private equity owners could well move Qantas’ 6,000 aircraft maintenance jobs from Australia to China or other “cheap” maintenance locations.  AMWU National Secretary Doug Cameron said that they were extremely concerned and opposed to the buy out, adding that the Prime Minister needs to set some national interest tests on the sale of Qantas, in particular given the carrier’s role in Australia’s defence and national emergencies, saying whether the union was considering a strike, “We think it should be dealt with politically before we look at any other options.”

Qantas shares closed down 1.4% at $A4.93 yesterday, after earlier dropping as low as 3.4%, with the stock having hit a record high of $A5.25 on Wednesday after the announcement, with analysts speculating that Qantas was unlikely to support a bid of less than $A5.50 a share, $A10.9 billion.

Goldman Sachs JBWere analyst Paul Ryan said Macquarie said any proposal would need Qantas board support, “Hurdles to any agreed bid eventuating are considerable,” adding, “With a federal election next year, the political fallout from potential offshoring of high-skilled jobs is also likely to remain a consideration.”

In an attempt to head off the foreign ownership debate, Macquarie said on Wednesday that should they make a firm proposal, it would keep to the existing ownership caps in Qantas and particularly continue the majority Australian ownership, with the rules set when Qantas was privatised capping any one single stake in the airline at 25%, total foreign ownership at 49% and total ownership by any foreign airlines at 35%.

To clarify matters, the deal involves Macquarie and its associates taking a 25% stake, other Australian investors taking a 25% stake, Qantas senior management being asked to take a 1% stake and international players, led by Texas Pacific, taking the rest, so that could mean that Qantas could be 49% foreign owned, which is right on the foreign ownership cap.

That mix would also allow the consortium to get around ownership restrictions that limit one individual entity to owning no more than 25% of the airline, and international interests collectively owning no more that 49%.

Federal Treasurer, Peter Costello will be the man who will approve or not, any significant foreign stake in Qantas and he said yesterday that the government had no plans to remove the cap requiring Qantas to be majority Australian-owned.

With speculation that the consortium might spin off the non core assets such as catering, breaking up Qantas he said, “I can’t see why any proposal to split the thing up would be in anybody’s interests.”

Macquarie Bank has already said that it would be restricted to owning less than 15% of Qantas because of its already very significant airport ownership.

National Party Senator Barnaby Joyce said he was concerned a deal would lead to job losses, local assets falling into foreign hands and regional routes being cut, adding “I don’t think someone in Houston would be sentimental in stopping that and I don’t think someone in New York or Tokyo is going to be terribly sentimental just because it has a kangaroo on its tail about what they do to Qantas.”

With Australia’s cashed up Allco Finance Group saying it was considering joining the proposed bid, its shares rose 8.3% $A11.18 as its investors showed their relief that Allco’s aircraft leasing business would not lose a deal which involves leasing 22 aircraft to Qantas.

The Mole Poll today is asking the question, whether you think the Macquarie/Pacific Texas bid to purchase Qantas is good or not. 

Why not vote NOW by clicking YES or NO on the Moll Poll section on this page and let us have your views and comments by clicking on the Comments section below.

A report by The Mole