Guess what; Qantas has a new major shareholder: admittedly it’s not a direct holding, yet,but as of the close of business Wednesday almost 200 million shares had been accepted into the $5.60 a share Airline Partners Australia offer.
That’s more than $1.11 billion worth of stock and a sign small shareholders are heading slowly but surely heading for the exits.
The acceptance level was boosted by more than 1.1 per cent on Wednesday alone with shareholders assuming that the offer was closing on March 9 as previously stated.
But offers as controversial as this rarely go according to plan so Airline Partners Australia now says the offer will close on April 3.
Helping APA will be the green light late yesterday from the ACCC.
Commission chairman, Graeme Samuel says the ACCC will not intervene in the proposed acquisition of Qantas Airways Ltd by the consortium represented by Airline Partners Australia Ltd.
Samuel said in a statement that “The proposed acquisition is unlikely to substantially lessen competition under section 50 of the Trade Practices Act 1974.
“The ACCC conducted a comprehensive review of the proposed acquisition including extensive market inquiries with interested parties.
“The market inquiries revealed a range of potential competition issues arising from the interests of APA consortium members, including in relation to aeronautical services, domestic and international air passenger services, aircraft leasing services, airline catering, the manufacture and supply of aircraft parts, and ticket reservation and booking distribution services.
“The ACCC found there was no likely substantial lessening of competition in each of these cases, having regard to the restrictions on related party transactions under the APA consortium and the level of competition in the relevant markets.
“The ACCC also closely reviewed whether Macquarie Bank’s partial direct and indirect interests in Qantas and Sydney Airport could lead to discrimination in favour of Qantas by Sydney Airport management, giving rise to a lessening of competition in downstream aviation markets.
“Our assessment indicated that there is a level of influence by Macquarie Bank over Sydney Airport, but that this influence is somewhat mitigated by a series of regulatory and corporate constraints.
“On the basis that Macquarie Bank may have some ability to influence Sydney Airport, the ACCC explored a variety of potential discrimination scenarios in depth with market participants,” Mr Samuel said.
“We recognised that Sydney Airport can already exercise a level of market power, and can discriminate between airlines for its own commercial reasons.
“The key question for us was whether the acquisition by Macquarie Bank of a minority shareholding in Qantas would increase its ability and incentive to seek to facilitate discrimination in favour of Qantas, to the extent that it could be a substantial lessening of competition.
“Ultimately, it appeared from the ACCC’s extensive market inquiries that there were not clear incentives for Macquarie Bank to seek to facilitate increased discrimination in favour of Qantas.
“The ACCC therefore considers that APA’s proposed acquisition is unlikely to give rise to a substantial lessening of competition.”
That will allow negotiations to continue with at least two big shareholders who are reluctant to accept (an arm of UBS is one) and for a quick Senate inquiry to provide an outlet for the emotion many people clearly still have about the deal.
The feeling is that sometimes a bit of venting helps clear the head and make the decision-making a bit easier. And that applies to politicians as well as investors.
It’s why Federal Treasurer Peter Costello is fairly relaxed about the inquiry which he says won’t delay a decision on the APA takeover bid.
The Foreign Investment Review Board is due to report to Mr Costello next week on whether the Macquarie Bank-led bid breaches foreign ownership laws. (So far there doesn’t seem to be any problem, unless something deeply buried has been uncovered.
The Senate yesterday agreed to hold a short inquiry into the proposed sale’s impact on low-cost airline Jetstar, a Qantas subsidiary.
That will probe whether Jetstar is subject to the Qantas Shareholding Act; on the face of it, it isn’t
The inquiry will report back on March 20 and will take just one day, which is a bit derisory given that the whole deal is worth $11.1 billion and raises a lot of issues such as the role of QAN management in the deal, the role of the private equity firms and deals of this nature.
But perhaps future private equity deals won’t be affected by the problems the Qantas transaction is encountering or by the market nervousness, with our market down yesterday by just over half a per cent.
The ‘no’ to the private buyout of Brisbane based travel business, Flight Centre, will probably have a greater impact, good or bad.
Big shareholder, Lazards nixed the deal because it thought the price should have been closer to $20 rather than $17.20 on offer from management and insiders and their buyout partner, Pacific Equity Partners (PEP).
Lazards thought the price was too low and too beneficial to the insiders and not to shareholders generally and the interim profit confirmed its view with a better than expected result.
Lazards won, the deal was beaten and yesterday FLT shares plunged by $2.79, to a low of $14.10 at one stage, before recovering a little to sit around the $15 at the close.
That’s around $1.50 higher than the $13.50 level the shares were trading at when the buyout was announced last year.
The question now for shareholders large in small in companies subjected to private equity attention is asking for more going to ruin the deal and the share price if it fails.
FLT’s experience is a yes in the short term, but if a deal
