Singapore Airlines (SIA) has taken matters into its own hands in an effort to wind up the long-running saga over airline ownership in Australasia.
While Brierley Investments (BIL) maintains a temporary freeze on the sale of its Air New Zealand (ANZ) shares until ANZ can complete its purchase of Ansett, SIA quietly gained approval from New Zealand's Government and went into the market to buy 8.3% of ANZ's shares.
That move eliminated the remaining hurdle to SIA's purchase of ANZ shares from BIL, and, more importantly, may have trumped a competing bid by Qantas Airways.
ANZ's future ownership has been uncertain since March when SIA almost agreed to buy 25% of ANZ from BIL. Last minute differences scuttled that and allowed Qantas to make its own bid.
The stumbling block between SIA and BIL was over who should bear the risk of buying ANZ shares at market prices to complete the 25% foreign share ownership SIA wants and is allowed under New Zealand law. BIL owns only 16.7% of those shares. That meant someone would need to buy another 8.3% in the market. SIA and BIL had not agreed on who should bear that risk.
That issue is now moot since SIA bought those shares itself, and did so at the same price - NZ$3 ($1.50) per share - it was willing to pay BIL.
SIA may save money in the long run because the shares it bought directly are not subject to a "performance kicker" it agreed to pay BIL if ANZ meets specified targets over the next two years. SIA's move does not guarantee that BIL will sell it the remaining shares. But it makes that outcome more likely.
First, BIL will remain an ANZ shareholder even after selling its foreign shares. Sir Selwyn Cushing, who chairs BIL and ANZ, has made it clear that sharing ownership with SIA is his desired result. "That is the most favoured outcome," Cushing says, "if only to take advantage of the huge opportunity in Ansett Australia-and Air New Zealand going forward."
If Qantas were to gain a strategic stake in ANZ, ANZ would have to divest Ansett to satisfy Australian competition concerns. Second, with SIA now a part owner of ANZ, it is less certain that Wellington would consent to Qantas also becoming an owner. The New Zealand Government holds a veto power with its ANZ "Kiwi" share.
Source: Airline Business
