The Age – Qantas bid now set for take-off

Mathew Murphy in The Age sasy that Airline Partners Australia’s banks have almost guaranteed the success of its $11.1 billion bid for Qantas by agreeing to lower the minimum level of acceptances to 70%.

Under the new arrangements, Qantas’ debt level will rise “significantly”. Equity funds that APA injects into the deal will be countered by capital returns to it of an expected $4.5 billion, with $2.5 billion of that in the first year. As well, shareholders will benefit from $1.5 billion to be paid in dividends in the first year.

After marathon talks with its financiers, APA signed off on a restructured offer that will lower the minimum shareholder acceptance level from the original 90 per cent. APA’s loans are now to be secured against Qantas shares rather than assets.

The APA consortium, which includes Macquarie Bank and private equity firm Texas Pacific Group, also said it was extending the $5.45-a-share bid by 14 days. It will now close on May 4.

Qantas shares jumped after it became clear the deal had been reworked. They rose 8¢ to $5.39, just 6¢ shy of the takeover offer price. Almost 19 million shares changed hands.

APA’s supplementary Bidder’s Statement revealed that it would insist its nominees be “appointed to the board of Qantas in place of all of the non-executive directors currently serving on the board of Qantas”.

Qantas chief executive Geoff Dixon and chief financial officer Peter Gregg would be invited to remain on the board.

A “new facility” to be created if APA gains more than 70% of Qantas’ shares but less than 90% has an initial term of three years, with a two-year extension possible.

At the 70%, Qantas will be removed from the S&P/ASX indices.

The move to lower minimum acceptances came after Balanced Equity Management’s Andrew Sisson said he would reject the $5.45-a-share offer. His fund has a 3.9% stake in Qantas. A further 6% is held by UBS, which is expected to reject the bid as well. Should UBS do so, the combined 9.9% would need little addition from other shareholders to prevent the takeover reaching the 90% required for compulsory acquisition.

Mr Sisson said last night Balanced Equity would hold on to its shares in Qantas, which he said “all of a sudden have become more attractive”.

“It is quite an attractive proposition to stay in over the next period,” he said. “At some point the group will come back to buy out the minorities and will produce a better offer.”

APA controls about 31% of Qantas, with another 40% believed to be tied up in hedge funds, which are expected to accept the offer.

APA director Bob Mansfield said that while he was “comfortable having other people on the (share) register”, he urged Qantas shareholders to sell their shares, saying it was “simply time to make a decision”.

“We are prepared to proceed with less than 100% ownership of Qantas,” he said. “Rest assured, we would still like 90%. The reality is with the public statements made by some shareholders in relation to accepting the bid, that’s not achievable.

“When the reality hit home, we had to sit down and ask ourselves, ‘where do we move from here?’, and that’s why we have come up with this revised condition.”

Mr Mansfield said the $5.45-a-share offer was “full, fair and reasonable” in light of “serious competitive threats” from Qantas’ competitors.

Qantas has announced plans to expand its aircraft fleet, increasing its domestic capacity by 14% and spending $13 billion on new aircraft over the next few years.

Qantas issued a statement to the stock exchange confirming its recommendation that shareholders accept APA’s offer.

The Federal Government has approved the sale of the company provided a majority stake remains in Australian hands.

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Report by The Mole