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As circling rumours mentioned earlier, it now finally happened:

Australia’s iconic carrier accepts sweetened offer in world’s biggest aviation buyout

Qantas Airways yesterday accepted a sweetened A$11.1 billion ($13.4 billion) buyout by a consortium led by Australia’s Macquarie Bank and US-based Texas Pacific Group in the world’s biggest aviation takeover.

The agreement was struck just hours after Qantas, Australia’s largest airline, rejected an A$10.9-billion initial offer, as the consortium dropped conditions allowing them to walk away or be paid a breakup fee if the deal collapsed.

The consortium, Airline Partners Australia, also increased its offer by 10 Australian cents to A$5.60 a share in cash.

The buyers will get control of an airline that has forecast a 14th straight annual profit, withstanding an industry slump that triggered US$40 billion ($61.5 billion) of losses by global carriers since 2001. The bid extends the busiest year of aviation deals since at least 2000. In the US, United Airlines and Continental Airlines are in discussions to create the world’s largest carrier, people familiar with the deal said on Wednesday.

“Qantas has a strong position in the domestic market and no other airline in the world has that kind of franchise,” said Mr Jason Teh, who helps manage the equivalent of US$4.3 billion at Investors Mutual in Sydney, including Qantas shares.

Qantas shares rose 19 cents to A$5.28 yesterday, a 6-per-cent discount from the offer price on concern the government may block the takeover as being against the national interest.

“Public support will be critical,” said Mr Fabian Babich, a transport analyst at BBY in Sydney. “If the public can’t see the benefits from the bid, the federal treasurer will likely have a bias towards blocking it.”

Treasurer Peter Costello last invoked national interest powers to block Royal Dutch Shell Group’s bid for Woodside Petroleum, which controls Australia’s largest natural gas reserves.

Mr Costello said yesterday that the Foreign Investment Review Board would examine the Qantas proposal.

“I don’t believe that aviation policy which is set by governments should take any consideration into the ownership of a particular entity provided it conforms itself to the regulations of a country,” Qantas chief executive Geoff Dixon said yesterday.

“Qantas is still the same company,” he said.

Mr Dixon, who has run Qantas since 2001, will remain in the job for a further three years. He said the new owners had no plans to break up the airline, send maintenance jobs overseas or cut regional services. The airline, known as “The Flying Kangaroo” for its red tail logo, has become an Australian icon since it was founded in the Queensland outback in 1920.

“You might as well put a lone star on the tail instead of the kangaroo,” Mr Barnaby Joyce, a Nationals party senator from Queensland, said. “We used to look after our own but that’s no longer the case with Qantas.”

Macquarie, Australia’s largest investment bank, will have a stake of less than 15 per cent in Qantas to avert competition concerns. Macquarie’s airport investment fund is the biggest shareholder in Sydney Airport, where Qantas is based.

Investor extraordinaire David Bonderman’s Texas Pacific and Canada’s One Corp will hold a 37.5-per-cent stake between them. Mr Bonderman bought Continental in 1993, returned the carrier to profit in 1995 and sold out for a 10-fold return three years later. Other foreign investors will hold 11.5 per cent.

Sydney-based Allco Finance Group and Allco Equity Partners will take a 35-per-cent stake, ensuring Qantas remains majority Australian-owned, as required by law.

The airline’s executivs will take a 1-per-cent stake in the buyout group. The offer values Qantas at 17.5 times forecast earnings for 2007, compared with Singapore Airlines, which trades at 13.4 times forecast earnings, and Cathay Pacific Airways at 15.4 times.

Source: Bloomberg

Technorati : asia, australia, politics, quantas, travel

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written by Chris