SIA chief executive Dr Cheong Choong Keong flew to Auckland in March to finalise a deal for a 25% stake in ANZ. But Cheong returned to Singapore empty handed.
SIA was ready to buy 17% of ANZ now and another 8% later this year from Brierley Investments, which would have given the Singapore carrier 25% of ANZ and Ansett Australian for about NZ$400 million ($195 million).
But the deal collapsed when Brierley' chairman Sir Selwyn Cushing reportedly entered talks at the last minute and tried to boost the agreed price from NZ$2.75 to NZ$3 per share and stay as ANZ chairman two more years.
SIA was also rebuffed when it asked Wellington about raising ANZ's foreign share limit from 25% to 40% so that it could buy more stock.
Buying into ANZ was not SIA's first choice. Last year, when ANZ blocked its attempt to acquire half of Ansett, SIA ignored suggestions that the New Zealand carrier could buy Ansett and SIA could instead buy into ANZ. SIA may have seen that proposal more as a strategy for Brierley to leave ANZ than a deal to help SIA.
Since then the question has been whether SIA would back Virgin's Australian venture or reconsider an ANZ stake once ANZ completed its takeover of Ansett. Cheong's New Zealand visit signalled SIA's decision.
Meanwhile, ANZ is facing problems with its takeover of Ansett Australia. Two unions representing Ansett employees promise a fight before Australia's Foreign Investment Review Board.
If ANZ overcomes that in time to meet its 30 April deadline, longer-term issues loom. Unions representing Ansett's administrative and engineering staff fear the "export" of up to 2,000 jobs to New Zealand. Jim McCrea, ANZ managing director, concedes some overlap in administrative staff, but none in engineering.
If the Foreign Investment Review Board approves the takeover, it will mark the end of regulatory hurdles and the erection of interlinked financial and competitive barriers.
The prevailing view among analysts is that ANZ lacks the resources to capitalise on the ANZ-Ansett combination. Virgin's imminent entry into Australia will put serious pressure on yields.
Analysts say Ansett's cash needs could push ANZ's consolidated net debt-equity ratio as high as 132%. Standard & Poor has cut ANZ's long-term rating, and Morgan Stanley Dean Witter claims the takeover could "significantly raise the risk premium of Air NZ shares".
"Air NZ will have a tough time with margins, having to drive costs down when fares come under pressure," warns Chin Lim, regional aviation analyst for Morgan Stanley Dean Witter. The SIA investment would ease these problems.
Source: Airline Business
