Qantas bid slipping out of control
Kate Askew and Scott Rochfort in the Sydney Morning Herald yesterday said that the $11.1 billion private equity bid for Qantas is slipping out of the suitors’ control, following indications that institutional investors have begun withdrawing their acceptances.
The claim from the bidders, set out in a press release, was that the withdrawal was a result of local and overseas institutions taking back the shares so they could then sell “on market at a discount to the offer price”.
However, it could not provide details about which institutions, or how it knew these investors were selling their Qantas shares.
Adding to pressure on the bid, leading dissident shareholder, UBS Global Asset Management, continued topping up its Qantas shareholding and UBS’s funds management arm bought 3.48 million shares to take its stake from 6% to about 6.2%.
While Airline Partners Australia yesterday claimed hedge funds had been buying Qantas shares from institutions, an analysis of the UBS shareholder notice would indicate at least some had been selling.
It was UBS Global Asset Management and Balanced Equity Management’s refusal to accept the offer that almost torpedoed the bid last month, prompting emergency negotiations with the consortium’s debt providers.
It was only last week that APA finalised a re-worked debt package in a last ditch attempt to save its bid for the national carrier.
Under the new conditions it only needs acceptances for 70% of Qantas shares compared with 90% in the original offer.
Meanwhile, Qantas’s independent directors have unanimously recommended the revised APA bid in the absence of a “superior offer”, which they did not expect to emerge.
The directors noted they had considered a similar strategy to APA’s, raising new debt and paying huge dividends, but they said, “of particular concern………were the implications for Qantas’s credit ratings, cost of debt and industry, comparable gearing levels, and the attendant risks for Qantas”.
They said nothing had occurred to make them change their recommendation and in the months since the bid was first announced Qantas has upgraded its profit forecast three times.
Expectations of a fourth profit upgrade were fuelled on Tuesday by the release of another set of strong traffic figures from Qantas, with directors warning shareholders that APA’s proposed $4.5 billion dividend and capital return would result in substantial costs to Qantas and noted that the dividend, which would be distributed to all shareholders, would likely be unfranked.
The bid acceptance level has fallen from 30.06% of Qantas shares to 28.86% and Qantas shares fell 1c to $5.37, 7c below the $5.45 bid price.
Report by The Mole
John Alwyn-Jones
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