The private equity bid to take over Qantas Airways has failed and the group behind it has decided against making another offer for the airline.
The consortium known as Airline Partners Australia, led by Macquarie Bank and a group of international investors including Texas Pacific Group, failed to gain shareholder acceptance of its A$11 billion ($9 billion) takeover offer after six months of legal, financial and political turmoil. Most shareholders appeared to reject the offer based on price.
The bid died an ignoble death in May. APA needed acceptance from 50% of shareholders to keep its offer open another two weeks, and needed 70% acceptance to complete the deal. When the deadline closed, however, shareholder acceptances fell short of 50%.
In an effort to keep its bid alive, APA raised two arguments. First it claimed it should be allowed to count a late-arriving acceptance from a New York hedge fund that would put acceptances over the 50% threshold. After regulators rejected this claim, APA argued that some shareholders, especially those investing in hedge funds, had accepted for some but not all their shares.
If those partial acceptances applied to all a shareholder's holdings, as the offer terms required, APA claimed total acceptances would have equalled 57%. But to prove this would have required a lengthy lawsuit. Under intense pressure and threats of countersuits, APA abandoned this argument and conceded its bid had failed. It initially said it would consider a new bid but a week later decided against making another offer.
APA relented after Qantas chairman Margaret Jackson and Australia's treasurer Peter Costello said any new bid would have to start from scratch. "APA has concluded that in the current environment and circumstances a renewed offer on terms unacceptable to APA would not be likely to succeed. On that basis APA has decided not to proceed with a renewed offer for Qantas at this time," it said.
Analysts estimated it would have taken three to six months for APA to arrange financing for a new bid. By then the dynamics would be different, with Australia facing national elections and Qantas facing new challenges. Tiger Airlines plans to launch domestic flights later this year, new pressure is expected from such long-haul rivals as Emirates, and next year domestic rival Virgin Blue plans to launch flights to the USA.
Despite calls for Jackson and chief executive Geoff Dixon to step down, neither has shown any sign of leaving. Dixon says Qantas will now refocus on strategic plans that were afoot last year when the takeover drama started.
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Source: Airline Business
