QAN - Qantas Airways

Did I just hear on the radio that QAN has recieved a T/O offer from the big Mac???

Kauri said:

Did I just hear on the radio that QAN has recieved a T/O offer from the big Mac???

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QAN have been 'approached' by MacBank and Texas Pacific Group, but no further details have been given.

A senior institutional trader said Tuesday there was speculation Macquarie was preparing a A$5.50 a share cash offer for Qantas, which would value the airline at A$10.9 billion.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aEZCSR29_6Oc&refer=home

Qantas Approached by Macquarie Bank, Texas Pacific (Update2)

By Vesna Poljak

Nov. 22 (Bloomberg) -- Qantas Airways Ltd., Australia's biggest airline, received a takeover approach from Macquarie Bank Ltd. and Texas Pacific Group, sparking a 16 percent gain in its shares.

``The approach is confidential and incomplete,'' Sydney-based Qantas said in a statement today. The biggest gain in the share price in 5 1/2 years lifted the airline's market value to A$10 billion ($7.7 billion).

An offer for Qantas would follow other bids by Macquarie Bank for high-profile assets, including the London Stock Exchange and the Indiana Toll Road. Funds the bank manages own assets include Sydney airport.

``For Macquarie there's obviously a cross-interest in that they also manage airports, including Sydney,'' said Ian Thomas, a senior consultant at the Centre for Asia-Pacific Aviation in Sydney. ``For Qantas, it may provide them with a way of accessing more foreign capital.''

An offer would have to be structured to overcome government- imposed limits on Qantas, restricting any single investor to a 25 percent stake, and capping combined foreign investment at 49 percent.

Matthew Russell, a spokesman for Sydney-based Macquarie Bank, the nation's biggest securities firm, didn't immediately return a call seeking comment.

Qantas Chief Executive Officer Geoff Dixon has forecast the airline's profit will increase this year, even as his fuel bill rises to a record, as he cuts jobs and adds new customers with discount carrier Jetstar.

The airline's fuel bill will rise to A$3.9 billion in 2007 from A$2.8 billion last year. Qantas in August reported 2006 profit fell 30 percent to A$479.5 million in the year ended June 30, with labor and fuel making up about 50 percent of expenses.

Qantas shares rose 75 cents to A$5.10 at 11:03 a.m. in Sydney. Before today, Qantas stock had risen 7.8 percent this year, lagging behind the benchmark S&P/ASX 200 Index's 14 percent gain.

Qantas is the third-biggest airline in the Asia-Pacific region by sales, trailing Japan Airlines Corp. and All Nippon Airways Co. according to Bloomberg data.

How can the takeover happen? At least, it won't be a 100% takeover. Any one has any view on it?

Australia will keep flying roo: Vaile
November 22, 2006 01:43pm
http://www.news.com.au/business/story/0,23636,20801989-462,00.html

DEPUTY Prime Minister Mark Vaile has said he is confident Qantas will remain in Australian hands.

A consortium led by Macquarie Bank and US private equity firm Texas Pacific Group has made an approach for a takeover bid, sending shares in Australia's biggest airline soaring to record levels.

Qantas and Macquarie have both declined to comment.

Mr Vaile, who is also Transport and Regional Services Minister, said today it was up to shareholders and the board to decide on the bid.

"On the commercial side, it is for the board of Qantas and the shareholders of Qantas as to what they do,'' Mr Vaile said in Brisbane.

Since the privatisation of the airline, the Government had maintained its individual shareholding cap at 25 per cent and foreign ownership cap at 49 per cent, he said.

"There is no view to changing any of those caps,'' Mr Vaile said.

"At the same time, obviously, shareholders have individual rights and if they can capitalise on interest in a well-run company, well that's up to the shareholders and up to the marketplace.''

Mr Vaile said the Government would continue to play its role as government regulator of the airline industry on behalf of the people of Australia.

He said a proposal from offshore investors to buy Coles Myer also had not materialised and like the retailer, Qantas was also expected to remain in Australian hands.

"I think there will always be a significant level of Australian ownership,'' Mr Vaile said.

"Obviously, with the foreign ownership cap, there will always be a majority Australian ownership of Qantas.

"But I can confidentially predict you will never see the (flying kangaroo) moved off the tail of Qantas aircraft.''

Up 15%. I knew I should have bought calls the other day on the rumour.

Bid challenges Aussie ownership
By Terry McCrann
November 23, 2006 12:00am
http://www.news.com.au/business/story/0,23636,20805633-521,00.html

THE $11 billion move by Macquarie Bank and Texas Pacific on Qantas is an extraordinary cocktail of straightforward "plain vanilla" private equity profit-seeking and a much more complicated play.

That's to say, it has the same essential ingredients of the two media private equity deals and the one proposed for and rejected by Coles.

The business is taken out of the public marketplace; it is loaded up with debt; the cashflow over the next three to five years is all directed at paying off the debt while it is also, hopefully, made much more profitable; then it is sold or refloated at a big profit.

So, you buy Qantas today at $11billion and sell it back in five years at $20 billion.

Qantas though is both different from and very special to Nine and Seven and Coles. That makes the deal much more complicated.

It operates under much more strict ownership rules, which are a key component of its actual operating business. They are also critical to any value-creating mergers or acquisitions.

The requirement that Qantas remains 51 per cent Australian-owned - which has driven the bidding structure - is not based solely on national jingoism or emotionalism.

But because 51 per cent Australian ownership is the basis for its global operations. That gets it access to routes and landing slots; and in turn structures its competitive environment.

So Texas Pacific could not just take a 50-50 partner as KKR did with Kerry Stokes at Seven and CVC Pacific with James Packer at PBL. Far less go for a much cleaner 100 per cent as the KKR-led consortium want to do with Coles.

This combines with the absence of an obvious core Packer/Stokes - has to be Aussie - partner anyway. Instead, there is Macquarie.

Enter the two government-mandated restrictions. That no one shareholder can own more than 25 per cent and total foreign ownership can't go above that 49 per cent which would deprive Qantas of all its international operating rights.

So we have a very unusual combination. Macquarie will take the maximum 25 per cent, "other" Aussie investors will take 25 per cent, and the Texas Pacific group will take a total 49 per cent with 1 per cent for staff.

It mightn't seem different from the other partnerships, but it definitely is.

What's going on with Qantas these days??

It used to be my favorite little blue chip with good incomes pushing the price up one week and SARS, oil price or terrorism pushing it down the next...

It's almost boring now, I held through the takeover turmoil and sold a few months ago at a tidy profit but at the same price as today, expecting it to drop like it usually does....

Perhaps QAN's drop has been offset by the share buybacks, which are increasing debt at a time when debt providers could be heading for troubled times...

Guess I'll hang on the sideline for a bit longer.

Baz take a look at some other airliner shares, in Australia and the world.

They suck because the industry is one of the most fiercely competetive ones so there's no monopoly to invest in (like BHP, Apple, Mobil) etc, Qantas shareholders were just lucky that APA came to kick the share price up the ass.. infact I reckon thats the only reason they did it because airliners shares are just awful.

If I were you I'd just go with just buying Boeing's shares as air traffic/travel volume is increasing and Boeing is winning so many contracts especially with dreamliner coming soon.

vishalt said:

If I were you I'd just go with just buying Boeing's shares as air traffic/travel volume is increasing and Boeing is winning so many contracts especially with dreamliner coming soon.

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I would think that this has already factored into Boeing's sp. They are definitely winning a lot of contracts though, mainly due to Airbus's refusal/inability to design a completely new plan in this class - the A350 reuses the A330's fuselage. So, until Airbus comes up with something new, they just can't compete.

I don't believe its been factored in Boeing's share price.

Once the Dreamliner comes out and everyone sees how awesome it is, everyone will want to buy more. EADS (owner of Airbus) has also been hit with corporate scandals so that gives reasons for people interested in buying shares of airline manufacturers a reason to change.

Boeing also makes defense aircraft and with a good economy, a war and other countries beefing up security Boeing has a lot on its plate and even more to come.

QAN came close to a disaster last week in Thailand! Thankfully all was OK, funny though I never heard anything about this in Australia.

http://bangkokpost.com/topstories/topstories.php?id=124968

Apparently, it's not the only time, just that this time it's happened while the plane was flying...

http://www.smh.com.au/articles/2008/01/09/1199554708603.html?page=2

This also co-incides with an engineers' union overtime ban which was to start today but will start on Friday.

Finally some good news...

Qantas Airways Ltd., Australia's biggest airline, gained 2.3 percent to A$4.45 after first-half profit doubled to a record as it cut fuel costs and economic growth boosted passenger traffic. ..

Does anyone have a comment on the share buy-back happening at QAN.
I would have thought that the SP should be increasing as the company owns more of itself?

somesortoftrader said:

Does anyone have a comment on the share buy-back happening at QAN.
I would have thought that the SP should be increasing as the company owns more of itself?

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I would hazard a guess that rising fuel costs and the high AUD are having an effect to the price. The market is in down swing o/all atm. Also, has recently gone xd. Could be all of these, none of these and maybe some others. Only a spectator atm anyway.

Methinks it might be time to revisit Qantas..

It has to be the best of the airlines with respect to high fuel cost due to hedging and lets face it, the business community are still travelling.

Incidently, I think there shouldn't be much of a slow down in private travel either since in many cases it still cost as much to drive from A to B than it does to fly.

$3.30 share price, P/E of 6 odd and 7% dividend yield look pretty good to me.

Risks with industrial action.... what's new!
Risks of a new CEO next year.. could be a factor

any other thoughts?

If you want to buy into an airline then IMHO Qantas would be the one to buy into....

HOWEVER.......

I would question the sanity of anyone who actually voluntarily buys into an airline (including Qantas)!! There are so many challenges/issues/problems in aviation even when things are good. When they turn bad (as they are currently starting too) ...Oh boy... Problems like unions and new CEOs are minor. If these were the only challenges facing Qantas I'd be saying go for it - BUT they're not by a long shot. So I don't have to repeat myself and bore people again have a look in the Virgin thread - this might give you some idea of my BIASED opinions.

malachii

Aside from the outlined risks in buying into aviation stocks, there is one very good reason to buy into QAN at the moment...... and that is if you think the price of oil is about to drop. Every time oil falls, QAN (and other stocks highly influenced by it) will rise. I have traded QAN a couple of times in the last month or so buying when I think the oil price is going to retreat.

Qantas

Just as well Qantas shareholders rejected the KKR private equity (usually funded from debt) offer for Qantas.

Search the web for Business Week 15. 5. 06 and Kohlberg Kravis Roberts.
KKR is now offering public shares through Amsterdam.

Quote from Business Week: "And by listing in Amsterdam, KKR stays insulated from SarbOx and other U.S. rules. In this novel deal, it'll use what one observer calls "dumber money" -- from public investors -- to finance deals from which private partners could reap windfalls, without divulging too many things they want kept private."

golfmos123 said:

Aside from the outlined risks in buying into aviation stocks, there is one very good reason to buy into QAN at the moment...... and that is if you think the price of oil is about to drop. Every time oil falls, QAN (and other stocks highly influenced by it) will rise. I have traded QAN a couple of times in the last month or so buying when I think the oil price is going to retreat.

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Sadly, that theory seems to have failed.

In mid-September QAN SP was around $3.50. It is now under $2.50. What happened to the POO since then? Crashed through the floor! Yet QAN also fell 30%. If only SP vs POO correlations were that simple, eh?

I hope QAN shareholders have adopted the correct seating position in preparation for todays SP crash landing following the failure of the BA merger.

aj
(non-holder)