Qantas bidders avoid overseas ownership scenario

A report in the Sydney Morning Herald says that Qantas is expected to remain at least 55% Australian-owned after members of the private equity consortium trying to take over the airline restructured their bid to avoid regulatory hurdles.

A source close to the deal yesterday confirmed that major players had settled on shareholdings smaller than the 25 per cent originally suggested.

It is also expected that the bid price might be below the $6 a share suggested by analysts last week following a surprise forecast from Qantas of a 30% rise in annual profit.

Sources indicated that a bid price in the range of $5.40 to $5.70 a share was more likely.

Australia’s biggest investment bank, Macquarie, and specialist airline buyout fund Texas Pacific Group are leading the consortium bidding up to $11 billion for the national flag-carrying airline.

Macquarie and Qantas yesterday refused to comment on reports about their potential shareholdings, but it is understood the reduced stakes were finalised about two weeks ago.

Treasurer Peter Costello had previously warned that national interest aspects of the deal would be closely examined, but his office was yesterday unable to say whether the restructured deal would now escape scrutiny.

A spokeswoman said: “Any bid for Qantas will have to comply with Australian law and foreign investment policy.”

The Foreign Investment Review Board referred queries to Mr Costello’s office.

The bid will be discussed at a scheduled Qantas board meeting today but there are doubts that this will be followed by the announcement for which the market has eagerly been waiting.

Suggestions yesterday were that the negotiations were taking longer than anticipated and might not produce a result until late this week or early next week.

The Financial Times reported that TPG planned to limit its stake to a maximum 14.9% holding, instead of the rumoured investment of 25%, and that Canada’s Onex Corp was looking at a similar limit, below the 15% trigger for a review of the deal by the FIRB.

But a move by the consortium to act as a group could still trigger a FIRB review, according to Shaw Stockbroking analyst Brent Mitchell.

“As soon as they put together a bid, they become associates and deemed to be a single party,” Mr Mitchell said. “It will be interesting to see how it pans out.”

The FT said Macquarie Bank was also proposing to limit its stake to 14.9% so it would avoid investigation by the Australian Competition & Consumer Commission into any potential conflict with its airport interests.

The remaining shareholding would be made up of Allco Finance 14.9%, Pacific Equity Partners 5%, senior Qantas management 1% and local superannuation funds.

Any decision by the Qantas board will hinge on the bid price offered by the consortium, which also includes Canada’s Onex, David Coe’s Allco Group and TPG’s local arm Pacific Equity Partners.

While there are already indications the board will reject a $5.20-per-share bid as too low, it is likely to take a more favourable view of an offer in the $5.40 to $5.70 range.

Qantas shares closed last night at $5.14, down 3c.

Report by The Mole