Qantas chairman, Margaret Jackson, has bowed to rising pressure and will retire at the annual meeting later this year, making her the first casualty of the failed $11.1 billion bid for the airline.
Her decision came at the end of a long board meeting in Melbourne.
According to a statement issued late last night, Qantas will be issuing a further statement today on her decision and on other changes at the board and in the company’s business mix.
Ms Jackson has paid the price for her strong support of the Airline Partners Australia bid, which was botched as the consortium hovered on the edge of success a fortnight ago tonight.
Ms Jackson upset shareholders with her strong statement in favour of the bid, including suggesting shareholders would be ‘mental’ if they didn’t accept the $5.45 a share offer.
The Qantas share price and investors made a mockery of all those forecasts from the board and chairman, Margaret Jackson and from Airline Partners Australia.
Remember how the board, Ms Jackson and APA, all forecast gloom and doom should the bid fail.
The price would fall, with some gloomsters among the analyst fraternity claiming it could plunge back to $4.20 or thereabouts?
Well, yesterday morning APA finally faced reality and said goodbye to any aspirations of bidding again for the airline.
The shares fell, to a low of $5.16 before recovering 9c in the afternoon in a very strong showing to end 3c lower at $5.25, with more than 64.5 million shares traded.
The lack of a huge price fall tells us the market thinks it is good fundamental value well above $5.00 a share.
That’s not so surprising seeing most brokers agree with that valuation and had a buy on it if it fell below $5.00. (Although Goldman Sachs JB Were has a valuation of $4.95.)
Remember the holders of more than half the shares thought it was a hold and wouldn’t go near the Macquarie Bank-led bid.
Qantas has a yield of around 4.6 per cent, which in this market might be construed as being a bit ‘troubled’ or lacking some fundamental speculative value.
But with the airline expected to earn close to a billion dollars this year it’s being priced for income, a bit of growth and even some ‘corporate activity’.
Balanced Equity has moved over 5 per cent, as has the big Barclays Global Investors which is obviously rebalancing its holding to an index weighting.
The effective APA price of $5.45 is now a bit of history.
You really have to wonder about the credibility of the board which tried to bully shareholders to accept the ‘cheap’ APA bid and warning us of a collapse in the share price if we didn’t. That wasn’t the case.
The QAN board met in Melbourne yesterday andthere are whispers that she will be replaced on a temporary basis by former CEO James Strong while a new chairman and a new CEO succession is put in place.
The board is supposed to have discussed a restructuring which, if and when it comes, will be accompanied by the mother of all warnings from CEO Geoff Dixon, who threw his lot in with the APA bid.
The board will probably adopt some of the APA strategies, such as selling off unwanted assets, or rather it should.
Dixon and Jackson are responsible for Qantas building up a $3 billion cash pile, moving into road transport, and not being fast enough to convert assets into cash where they do not need to be held on balance sheet.
They seem to be more interested in cutting employee costs rather than attacking those and the sleepy assets such as the Sydney and Melbourne domestic terminals.
In its statement yesterday APA said any new bid would probably fail after reporting on May 8 it was “exploring a number of alternatives, including the possibility of making a renewed offer for Qantas”.’
Macquarie and its partners (including TPG) would have needed to submit a new bid to Australia’s Foreign Investment Review Board and may have faced hostility from politicians, employees and investors who had already rejected the first offer.
The airline has raised its earnings forecast after accepting the APA offer last December. Pre-tax profit may almost double to $1.23 billion in 2008, from $671 million in the 12 months ended June 30, 2006.
The APA consortium was led by Macquarie Bank Ltd and included Allco Finance Group Ltd, Allco Equity Partners Ltd, Texas Pacific of the US and Canada’s Onex.
