Key Qantas stakeholder rejects takeover offer

ROHAN SULLIVAN
Associated Press

SYDNEY, AUSTRALIA — A key stakeholder in Qantas Airways said Friday it would not accept an $8.9-billion (U.S.) bid for the airline, throwing into doubt one of Australia’s biggest proposed takeovers.

Airline Partners Australia, the investment group making the bid, immediately announced it was extending the deadline for shareholders to accept its offer by more than two weeks to April 20 and was considering its options.

Balanced Equity Management, an institutional fund which owns about 4 per cent of Qantas, said Friday it would not accept the bid led by Australia’s Macquarie Bank and the Texas Pacific Group at the current price of $5.45 (Australian) per share ($4.40 U.S.).

Other members of the bidding group are Australia’s Allco Finance Group and Canada’s ONEX Corp.

The investment group needs to secure 90 per cent of shares for the deal to move ahead, but market sentiment has been moving against the bid in recent weeks on concerns that it undervalues the company.

“Since the announcement of the bid in December, 2006, equity markets have appreciated significantly,” Balanced Equity managing director Andrew Sisson said in a statement.

“Given the current level of the share market, in the absence of an adverse development in relation to Qantas, or a fall in equity markets, we do not intend to accept the bid … in respect of the shares we manage on behalf of others,” he said.

Qantas shares sank about 4 per cent to $4.89 (Australian) immediately after the announcement, before recovering to close 3.1 per cent lower at $5.06.

Another large stakeholder, UBS Global Asset Management, which holds about 7.1 per cent of Qantas, has reportedly also refused to back the bid at the current price. UBS has refused to comment publicly on the bid.

Bob Mansfield, director of Airlines Partners Australia, or APA, said the bid had passed all regulatory hurdles and that attaining the 90 per cent target was the only thing preventing the takeover from going ahead.

Mr. Mansfield said the group already gained around 29 per cent of Qantas shares, representing more than 50 per cent of total shareholders. He said the offer was being extended from the original deadline of April 3 “to ensure that remaining shareholders throughout Australia and around the world have an opportunity to respond.”

“Airline Partners Australia is considering a range of alternatives in light of the announcement” by Balanced Equity, the group said in a statement.

Because APA declared its bid final, Australia laws do not allow APA to increase it unless a rival offer emerges.

The $5.45 a share offered by APA on Dec. 14 was 33 per cent more than Qantas’ closing price on Nov. 6, the day before takeover speculation emerged.