It hasn’t taken long but the Qantas board and management are up to their old tricks again, telling people other than the shareholders things about the airline when they should be trying to be as transparent as possible.
Less than three weeks after the board was embarrassed by the failure of the $11.1 billion bid from the Macquarie-backed Airline Partners Australia group by the holders of a majority of shares, Qantas management and chairman, Margaret Jackson, are saying things they shouldn’t.
There were reports in newspapers yesterday morning that Qantas could be returning $2 billion – $3.5 billion to shareholders as a result of moves to make its balance sheet work harder.
And more brokers are upgrading Qantas’ earnings and its share price to well above the $5.45 of the APA offer: in the case of Macquarie Equities, well over $8 in the event of another private equity bid.
Some of these upgrades were responding to the estimates of capital returns.
And where were these estimates made? In a statement to the ASX? Nope, in briefings with Qantas staff.
The AFR reported: “Qantas Airways chief executive Geoff Dixon yesterday said the airline would return to ‘business as usual’, but needed to take around $3.5 billion in cash from its balance sheet to avoid becoming a target”.
Bloomberg reported this:
“Qantas Airways Ltd., the target of a failed A$11.1 billion ($9.1 billion) buyout, is benefiting from favorable conditions, Chief Executive Officer Geoff Dixon told workers, according to two employees who attended a briefing he gave yesterday.
The airline, which has forecast profit will double over the two years to June 2008, is in a `sweet spot,’ Dixon said, according to the people, who declined to be identified as the meeting wasn’t public. Qantas spokesman Simon Rushton confirmed that Dixon talked to workers in Sydney, without providing details.”
And, chairman, Margaret Jackson, again reminded shareholders why there was a need for her to depart ASAP when the AFR reported:
“Departing Qantas Airways chairman Margaret Jackson said last night she was happy for shareholders that the airline’s share price has held up after the failed $11 billion private equity bid, but voiced doubts about how long major hedge funds would stay on the share register, saying it was unlikely they would have a ‘long-term aligned interest'”
Well, the hedge funds appeared on the share register because Ms Jackson and the board assisted in putting them there by rolling over too quickly for the offer from APA.
The hedge funds would have invested anyway with the bid underway, it’s their nature, but what has been surprising is the way the QAN share price has remained quite strong, despite more than 200 million shares being traded since the bid failed, without the price falling under the $5 mark.
In fact the price firmed again yesterday, reaching $5.35 before easing to $5.32, up 5c and up 10c in two days. More than 45 million shares were traded yesterday.
But the aftermath of the Qantas board meeting and the departures of Ms Jackson and non-executive director, James Packer, had little to do with the rise in the share price on Monday.
The news of Dixon’s comments about a possible return was trickling out into the market Monday afternoon.
So with these plans still a state secret at Qantas, despite being discussed at last week’s board meeting, you have to ask why now and why not as a counter to the APA offer?
And why not a statement to the market detailing possible options?
That still has yet to be adequately explained by Qantas and the board: why it caved in and recommended the high price of $5.45, without detailing a counter policy which would produce similar value for shareholders.
Shareholders were upset at the fitful (almost willful) way Qantas’ improving financial position was released to the market by the board during the APA bid.
The information was important and yet the market would have been left in the dark if the likes of Balanced Equity, UBS and a couple of other vocal shareholders hadn’t called the board’s bluff.
The UBS manager who opposed the bid for Qantas has quit his job to go solo.
Paul Fiani, UBS Asset Management’s head of Australian equities, has resigned from the position to form his own “boutique” funds management operation.
Mr Fiani and Andrew Sisson of Balanced Equity Management, opposed the APA offer and effectively sunk it because they thought the $5.45 a share offer undervalued the airline.
Meanwhile the Qantas Sale Act, the legislation which governs the way the airline is run, stipulates that Ms Jackson’s replacement must be an Australian citizen.
It also stops James Strong, the former Qantas CEO from replacing Ms Jackson, because it bars former CEOs from becoming chairman. (It is unclear on a temporary basis).
