Qantas buyout group may re-launch bid after flop

The buyout group bidding for Australia's Qantas Airways Ltd may re-launch its offer after its original A$11 billion ($9 billion) bid collapsed over the weekend.

The group, which includes Macquarie Bank Ltd. and private equity firm Texas Pacific Group, said yesterday it was exploring alternatives, including a fresh A$5.45 a share offer, after an apparent blunder sank the world's largest airline takeover.

The buyout consortium, Airline Partners Australia (APA), initially had failed to reach 50 per cent of shareholder acceptances needed to keep the offer alive by Friday's deadline. A late acceptance from a US shareholder brought it up to 50.6 per cent, but Australian regulators refused to allow the late support, effectively killing the bid.

"Qantas farce: heads will roll," the front-page headline of the Sydney Morning Herald newspaper read yesterday after the airline declared the buy-out dead late Sunday.

Qantas shares, which had been due to resume trading at 11 a.m. (0100 GMT), were placed on a trading halt yesterday.

The cost of insuring Qantas debt fell yesterday, dealers said, with five-year credit default swaps falling about 60 basis points to about 140 points. The swaps had been rising on concerns the airline would take on much debt in the buyout.

Hedge funds, which had swooped in to buy Qantas stock in the hope of turning a quick profit, had been betting on acceptances edging over the 50 per cent line and it appeared the collapse of the offer had been a mistake, analysts said.

The mystery shareholder who came in late offering to sell a 4.96 per cent stake was US billionaire Samuel Heyman, local newspapers said.

It was another twist in the sale of the national icon which has been strongly opposed by unions and some politicians but eventually won support from the Australian government and Qantas management.

"APA is exploring a number of alternatives including the possibility of making a renewed offer for Qantas at A$5.45 per share," the bid group it said in a statement yesterday.

The previous offer was also valued at A$5.45 per share. APA is also arguing it may have reached the 50 per cent threshold in time because it's allowed to count all the holdings of investors who agreed to tender some of their shares, a source close to the matter said. It may go to court to clarify the issue.

However, Qantas earlier acknowledged the offer had failed and analysts said they did not expect APA to make another bid for Qantas for three to six months. They said it was unlikely a third party would get involved.

"For anybody else to come in having witnessed the debacle that has gone on in the last few months and the cost involved would be fairly hesitant before they stepped up to the plate," said Peter Harbison, managing director of the Centre for Asia Pacific Aviation.

Australia's Takeover Panel told Reuters Monday there were no specific rules related to a cooling-off period in between bids.

"There are no specific provisions in the Corporations Act which relates to follow-on bids," Nigel Morris, director of Takeovers Panel said, but would not comment specifically on Qantas' position.

Even if APA made another bid analysts said it could be overturned by the Australian government ahead of a national election later this year if there was enough opposition to a buyout.

Australian Treasurer Peter Costello said any new bid would need to go back to Australia's Foreign Investment Review Board for approval.

"If a new bid is lodged, that will of course have to be dealt with through the Foreign Investment Review Board. It depends of course on what the terms are," Mr Costello told reporters.

The Australian government said yesterday it had written to Qantas to clarify whether recent share trades had pushed foreign ownership of the airline above the allowed 49 per cent.

Analysts said the role of senior Qantas management who supported the deal, particularly chairman Margaret Jackson, was also in doubt.

Key shareholders had criticised the offer as too low, forcing APA to reduce the level of shareholder acceptances needed for the deal to 70 per cent from 90 per cent.

The bid group also includes Allco Finance Group, Allco Equity Partners and Canadian investment firm Onex Corp Allco Finance shares fell 4.4 per cent yesterday, while AEP was off 3.8 per cent.