Shares in Qantas will come under selling pressure today if trading is allowed but don’t expect a rout.
Any suspension will help dissipate some of the selling pressure but many hedge funds will want to sell quickly and move on.
Many institutions are underweight the airline or have no shares and need to rebuild their stakes as quickly as possible. They sold their shares into the market to hedge funds and others during the bid so this renewed buying will help underpin the price.
As well the Qantas price will be supported by index funds who hold build their portfolios based on the ASX 200 or other leading indices. These funds sold when it became clear that Qantas would drop out of the various indices.
And there’s the 12 per cent rise in the industrial side of the market since January and the realisation that Qantas was doing better than previous thought (a sore point during the bid).
And there will also be speculation that another bid will be forthcoming much like the way Pacific Equity Partners has returned to Flight Centre with a new structure after being initially rejected.
All this means a softer landing for Qantas than thought over the weekend afterthe mob from Airline Partners Australia found themselves in freefall Friday night when the bid failed.
It was really a comedy of errors: five hours (not five minutes) after the 7pm Friday night deadline,the hold out US hedge fund accepted for half its holding, and APA wanted to put the Qantas offer back in play.
A statement emerges from APS at 4.09 am Saturday claiming a late success, with the deadline at 7 pm the night before.
And who were APA kidding when they argued yesterday that a majority of shareholders had accepted the $5.45 offer.
That’s irrelevant. Without the latest acceptance of the US hedge fund, a majority of shareholders had still accepted the offer but it had failed.
In Australia in takeovers it’s a majority of shares in takeovers like the one launched by APA: the number of accepting shareholders has no meaning whatsoever.
No wonder Macquarie Bank and its mates failed with this takeover if that’s the best they can do by way of logic.
This takeover failed pure and simple because of incompetence.
It is also unparalleled in that such a huge takeover should be repudiated by so many shareholders: the rejection applies equally to the APA group and the board and management of the airline who threw their lot behind the offer from early on.
They have been badly compromised by its failure.
There should be no way that incompetence is rewarded by success.
We have rules in takeovers to make sure everything is cut and dried, that the processes are fully transparent and open to everyone and that there are no special favours.
APA knew the rules and they signed up to them when they launched the $5.45 a share offer ($5.60 originally until they took the 15c a share special dividend).
They also removed any wriggle room, by declaring the $5.45 offer was final (even after stripping out the 15c dividend Qantas shareholders were entitled to). Had that dividend been added to the $5.60 original offer the bid probably would have been still flying.
Incompetence and arrogance all around.
Federal Treasurer Peter Costello said yesterday he hoped Qantas board would make a statement before the stock market opens tomorrow morning, which it has promised to do. It made a statement late last night.
Now we will have to watch trading in the airline’s shares which if it happens will be frenetic and should be ignored until things settle down.
We still have the absurd situation where APA is asking for a review of the Panel’s ruling (and if that fails, Federal Court action could follow).
But they showed their ignorance by asking the Takeovers Panel for a ruling.
Didn’t they know the Panel can’t make rulings following a Federal Court decision which Treasurer Peter Costello said last week would be appealed to the High Court as a matter of urgency because of the principles involved?
The full Federal Court ruled that the Panel was a quasi-court, exercising powers in a way like the courts do and for that reason it was acting in an unconstitutional way.
It can still provide guidance and rulings on matters where judicial interpretation and decisions have to be made (such as on the practice and conduct of takeovers) but it cannot make any decisions by exercising any powers given to it in respect of possible breaches of takeovers regulations/laws etc.
And with the Qantas bid APA missed the 7pm deadline, pure and simple; the reason is not important because it can’t be argued that there needed to be an extension of time.
I wonder if there were any other shareholders whose acceptances arrived after 7pm and were not accepted.
News reports say US art collector and speculator, Samuel Heyman’s hedge fund built a 10 per cent stake in Qantas and for whatever reason changed his mind on Friday evening, Australian time, and refused to accept the bid, and then changed it, accepting for 50 per cent of his holding a few hours later.
“On Friday evening, APA announced that, subject to confirmation, it appeared that the offer had failed to reach the 50 per cent level required for the offer to proceed,” the consortium said in a statement.
“However, subsequently on Friday, APA received an acceptance from a large investor, which would be sufficient to take acceptances for Qantas shares to more than 50 per cent.”
The Times in London reported that Mr Heyman’s fund had promised the consortium its support from the start. “The fund had committed to sell its holding … at five minutes to seven it informed the consortium it would not be doing so,” it said.
After accepting the offer Heyman Investment Associates chief investment officer Jim Hoffman told The Times: “While we have consistently indicated t
