I,m beginning to see a "whiff" of Alan Bond in the operations of MBL and it's offer for Qantas. Some one is going to get badly burnt on this one and I can see Qantas going the same way as Ansett in the not too distant future
Duc, from your analysis, does this make sense? Can going the private equity route lower the cost of capital and make QAN a better run company?
IMO, the takeover of Qantas will eventually be wrapped up, whether it be at the current offer of $5.60 (inc dividend) or a higher one (unlikely). That's why I think that once positivity about the progress of the takeover creeps back in, hedge funds will again drive the sp upwards. But still, anything could happen. Think Flight Centre...Qantas Bidder Says More Protection Unnecessary
CANBERRA (Dow Jones)--Airline Partners Australia, the private equity consortium mounting a A$11.11 billion (US$8.74 billion) takeover bid for Qantas Airways Ltd. (QAN.AU), Tuesday said no further legislation is needed to protect the national flag carrier's domestic routes and local jobs.
APA director David Coe told a Senate committee hearing the undertakings given to the Australian government last week and the provisions of the Qantas Sale Act and the Air Navigation Act are adequate protection.
The Senate economics committee is holding a half-day hearing into legislation to ensure Qantas subsidiary Jetstar remains an Australian-owned Australian-based operation.
The hearing is being held amid intense market speculation that the APA bid might be scuttled by activist fund managers who believe the A$5.45 a share offer is too low.
Qantas shares fell to A$5.04 Tuesday morning as investors awaited news about any plans by Qantas and APA to reach a deal with at least two fund managers who together hold more than 10% of the airline's issued capital and who could block the takeover.
APA has said it wants at least 90% acceptances, allowing it to compulsorily buy the remaining shares under local rules, and implement a A$10.65 billion debt funding package that hinges on winning outright control.
UBS Global Asset Management has about 7.1% of Qantas while Balanced Equity Management has about 4%. Qantas shares were 1.7% or nine cents lower at A$5.07 at midday.
A senior institutional trader, who asked not to be named, said Qantas needs to issue fiscal 2008 guidance before the two fund managers might be persuaded that this is as good as it gets for investors.
"In the absence of that (guidance for next year), the group seems to have dug themselves a hole that is pretty much irreversible," the trader said of the stance taken by the two fund managers.
Qantas, whose board and management support the APA bid, has upgraded its fiscal 2007 profit estimates to a gain of up to 40% but hasn't ventured any further out with its forecasts.
Unions and some government lawmakers fear Qantas jobs and services will be sent overseas if the APA takeover proceeds. The pilots union has also alleged the consortium could transfer Qantas businesses to subsidiaries to lower costs.
Qantas and APA have both said they have no such plans.
Coe, the chairman of consortium members Allco Equity Partners (AEP.AU) and Allco Finance Group (AFG.AU), gave evidence by telephone. He told the inquiry the bidding group's intention is to expand both Qantas and its Jetstar subsidiary, particularly its operations in Asia.
He dismissed concerns raised by Family First Senator Steve Fielding that Jetstar could be sold to a foreign concern.
"The question of whether Jetstar can or cannot become a foreign-controlled entity is governed by the Air Navigation Act," Coe said. Under that act, Jetstar would not be able to continue its international operations if it became majority foreign-owned, he said.
In submissions to the Senate hearing, APA and Qantas said the wording of the Qantas Sale (Keep Jetstar Australia) Amendment Bill 2007 could force Qantas Airways Ltd. (QAN.AU) to dispose of its stake in some offshore businesses, including its New Zealand subsidiary Jetconnect Ltd. and its minority holdings in Fiji's Air Pacific Ltd. and Singapore-based Orangestar, the holding company for Jetstar Asia and Valuair.
Coe suggested the wording of the legislation be changed so the relevant provision applied to Jetstar only, rather than to "associated entities".
The committee is to report its findings by March 20.
-By Barbara Adam, Dow Jones Newswires
scsl said:QAN has dipped 25 cents (5%) in three days of trading, to be at the lowest sp in three months. Could this be a good short-term opportunity to go long QAN? At $5.07, it represents a 10% return, if the 15 cent special dividend is factored in.
Latest news on the takeover:
IMO, the takeover of Qantas will eventually be wrapped up, whether it be at the current offer of $5.60 (inc dividend) or a higher one (unlikely). That's why I think that once positivity about the progress of the takeover creeps back in, hedge funds will again drive the sp upwards. But still, anything could happen. Think Flight Centre...
Tommorrow's the last day for acceptances.
Even with the buyout offer the share price hasn't done much better than virgin blue this past year...
The other share price to watch today today is AFG which was part of the Airline Partners Australia...
Giant bluff goes badly wrong
AMERICAN billionaire Samuel Heyman woke up early Friday morning in the US to several frantic and incredulous phone calls. The most furious were from two giant US hedge funds.
The funds were beside themselves that Heyman had managed to scupper the entire Qantas deal by reneging on a mutual understanding. This agreement had been supposed to deliver just enough stock to get the bid across the line by 5am, New York time.
Not delivering on the deal was not in the script.
Yet there it was. A complete world-class debacle. Forget Qantas retail shareholders or the Qantas board or the passengers or staff or even angry Canberra politicians. This was all about the giant game of bluff played by international hedge funds for hundreds of millions of dollars in hard cash.
The belated appearance of 4.9 per cent of Qantas shares from Heyman five hours after the Friday deadline was evidence of a desperate effort to fix up a massive bluff gone horribly wrong. It was all too late.
The problem was that Heyman tried to outfox even his peers in the hedge funds, only to end up ruining the whole big money game by accident.
Greed outwitted itself, wrecking reputations and Airline Partners Australia's $11 billion bid at the same time.
Qantas board in crisis
Now the Qantas board under Margaret Jackson is in crisis, the share market is in suspense and the bidding partners and funds are still desperately -- and unsuccessfully -- trying to salvage what they can.
“If this was an elaborate and cunning plan, it was straight out of Blackadder,'' says one insider.
Back in Sydney, the bidders at APA and the Qantas board were stunned by the failure to get to 50 per cent of acceptances by the 7pm Friday deadline.
Over the previous several hours, repeated calls from the team at Macquarie Bank, led by Tim Bishop, had given no indication Heyman would not accept the bid, merely that he would delay as long as possible. Meanwhile, the great man was sleeping.
But Heyman was soon to be almost as stunned and dismayed as many in Australia. He had privately believed the deal would get through without him, no matter what those sharp boys at Macquarie Bank had warned.
He had seen them in action before, and he was sure they had 5 per cent more acceptances they weren't telling him about.
Otherwise all the hedge funds, including Heyman's own, stood to lose hundreds of millions of dollars. And that was a result an aggressive operator like Samuel Heyman certainly didn't want.
His own hedge fund held 10 per cent of Qantas, and two other funds, Polygon Investment Partners and Highbridge Capital Management, had another 10 per cent combined.
The agreement had been that, between them, they would each deliver 45 per cent to 60 per cent of their holdings -- enough to just edge the deal over the 50 per cent minimum acceptance required by the deadline.
Greed plays hand
But Heyman didn't make all his money by playing fair over the past few decades. He had apparently been secretly determined to keep all of his Qantas holding.
This meant he would have even more stock to keep trading over the following two weeks, trying to earn yet more millions by gaming the difference between the $5.45 offer price and the lower price available on the market.
With enough shares, even a few cents difference can translate into big profits.
Now, as Heyman belatedly understood all too clearly and the other two hedge funds were angrily reminding him, he had lost his bet big time. And it would cost them all dearly.
Perhaps up to $1 billion, depending on what level the Qantas shares fall to.
“He was trying to be so tricky he caught himself coming back the other way,'' says a seasoned player.
APA in turmoil
Nor was it a simple matter to suddenly change the rules. APA, in shock and confusion, had put out a formal statement at 8.30pm Sydney time (6.30am New York) on Friday, saying the bid was dead.
At home in Melbourne, a bitterly disappointed Qantas chair Margaret Jackson knew she was facing a brutal onslaught of criticism even if she had nothing to do with the fiasco of the bid's failure.
Her attempt to put what had seemed a generous offer to shareholders last December had ended in an unprecedented disaster, leaving Qantas at the mercy of hedge funds which apparently couldn't even manage their own financial trickery.
APA was just as morose. It had put the 7pm Friday deadline on precisely to bring to an end the continual meddling in the offer by the hedge funds. Now it had all exploded in their faces.
No one could initially comprehend what Heyman's motive had been. They couldn't understand whether it was an accidental oversight, a deliberate strategy they didn't get -- or a massive miscalculation. It turned out to be the last. But it didn't matter. The hammer had gone down. It was all over.
Back in New York, however, Heyman was hurriedly trying to turn back the clock. He was spurred on by his incensed hedge fund colleagues at Polygon and Highbridge.
Hedge fund play
Most of the hedge funds had bought in at about $5.15 a share. If the Qantas share price falls back below $5, they will have lost hundreds of millions of dollars.
They were determined that shouldn't be allowed to happen.
Heyman held about $1 billion worth of Qantas shares, 4.9 per cent in direct shares and 5.1 per cent in complicated derivatives. He sent acceptances for his 4.9 per cent worth of shares just before midnight Sydney time, meaning the bid was now just over the minimum 50 per cent required.
The various players at APA suddenly had to regroup, hurriedly trying to breathe life back into the corpse. They put together a second statement that was sent out just after 4am on Saturday.
This declared that even though it “appeared'' the offer had failed to reach the 50 per cent level required on Friday evening, ``an acceptance from a large investor'' subsequently would take it over the threshold. The statement said the bidders would apply to the Takeovers Panel to allow the offer to continue.
But APA's initial statement declaring the offer would not proceed had publicised and politicised the whole mess.
A hearing of the Takeovers Panel consists of three members drawn from a range of 38 part-time business, legal and academic experts. They were clearly unimpressed by the last-minute attempts to get the APA offer back on track.
“The circumstances of which APA has complained are in relation to a single sophisticated shareholder with a significant interest in Qantas, who should have been well aware of the closing time and date for the offer and of the implications of not meeting that deadline,'' the panel decision noted firmly yesterday.
APA is now applying for a review of that decision by the Takeovers Panel and the Australian Securities and Investments Commission. Few in the market believed last night that this desperate grab for a foothold has any chance of success.
The Qantas board held a grim meeting last night, ahead of putting out a statement withdrawing its support for any efforts to keep the bid alive. It's already been an almost unbelievable nightmare for an airline that likes to congratulate itself on being well run. But the nightmare will continue when everyone comes to work this morning.
APA keeping quiet
APA is keeping quiet as it tries to unscramble the omelette.
The group is made up of Macquarie Bank, TPG, Allco Finance and Allco Equity Partners and Canada's Onex Partners. Smart, sophisticated players all. And now looking decidedly foolish. How could it all go so catastrophically wrong in this world of smart suits and high finance?
But it is Samuel Heyman and the other hedge fund managers who will be fighting most ferociously to regain any advantage they can out of their own disastrous mistakes.
Heyman is clearly going to be marked as the man responsible for the disaster, particularly by his “friends'' at Highbridge and Polygon. Presumably the paybacks will be vicious.
But right now they all have a vested interest in trying to help each other solve the problem as much as they can.
“Some of the biggest hedge funds in the world own nearly half this company and they are looking at huge losses,'' says one of those involved. “You wouldn't want to be standing between them and a pile of money.''
Unfortunately for Qantas, that is just where the airline is.
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