May 06, 2007

Qantas Airways Says Takeover Is Finished

SYDNEY, Australia -- Qantas Airways said Sunday it considers a 10.8 billion Australian dollar (US$8.9 billion; euro6.55 billion) takeover bid for the airline to have failed, after regulators refused to step in and save it.

The bidder, a private equity-backed group named Airline Partners Australia, refused to accept defeat, saying it would appeal the regulators' decision.

But it appeared to be the end for the troubled, five-month-old bid for the company known as the Flying Kangaroo, and could spell fresh trauma for the airline including pressure on senior management to quit for backing the deal.

"The Qantas board considers that the current bid has failed," the airline said in a statement late Sunday, adding that APA had made several applications to the regulators over the weekend. "Accordingly, Qantas will proceed with strategies and plans for its future," the statement said.

Earlier Sunday, the body empowered by the Australian Securities and Investments Commission to rule on buyouts said it had refused APA's request to allow a bundle of shares it secured after a Friday deadline to be counted as part of its stake in the company.

Without the bundle, the group _ led by Australia's Macquarie Bank and Allco Finance Group and TPG Inc. from Forth Worth, Texas, _ falls short of the 50 percent minimum stake it needed to keep its bid alive for two more weeks. It needed 70 percent to get the loans it needed for the deal.

The decision was another twist in a dramatic weekend for the deal, which would have been one of Australia's largest buyouts.

APA initially announced late Friday night that it had not achieved 50 percent of acceptances and its bid for Qantas had failed. Within hours, it reversed itself, saying a lone stakeholder had given it just enough shares to keep the bid alive _ but after the deadline.

The panel said it saw no reason to allow the latecomer's acceptances to be included.

"The panel does not accept that Qantas shareholders have not had a reasonable opportunity to participate in the offer," it said in a statement. "Shareholders were well aware of the deadlines and the implications of not accepting by the deadlines."

Refusing to concede defeat, APA sought an urgent review of the panel's decision.

Analysts said Qantas' share price will tumble if the bid fails, as hedge funds that bought stock since the bid was launched cut their losses.

Qantas shares closed Friday at A$5.38.

And board members, including Qantas chair Margaret Jackson and chief executive Geoff Dixon, were likely to face intense pressure over the failure.

"I think there's egg on the faces of a lot of people," John Curry, deputy president of the Australian Shareholders Association nonprofit watchdog group, said ahead of the panel's decision.

"The board collectively must take responsibility for the fiasco," he told television's Ten Network.

The board has been criticized for backing the bid because its structure adds a massive debt load to the company while earning senior management and takeover partners such as Macquarie huge fees.

At least one major stakeholder said the A$5.45-a-share offer undervalues Qantas, which has twice upgraded profit forecasts since the bid was launched on Dec. 14 in a surging stock market.

Jackson "was an active supporter of the bid, and certainly if the bid fails ... she would have to reconsider her position," said Brent Mitchell of Shaw Stockbroking. "I think it would be difficult for her to continue."

Dixon was "also in a very difficult position, (though) it may be that the remaining shareholders would like him to continue," Mitchell told Sky News.

Prime Minister John Howard's government approved the bid after a review found it did not breach any foreign investment regulations or laws protecting Qantas from overseas ownership.

Before the Qantas statement was released, Transport Minister Mark Vaile on Sunday said the board must "make a clear statement of their intention for the way forward in the interests of their shareholders and the traveling public."

APA, which initially said the bid was dependent on gaining 90 percent of shares, changed its terms to 70 percent and twice extended the deadline for acceptances after shareholder resistance became apparent.

The 2001 buyout of telecommunications company Optus by Singapore Telecommunications for about A$14 billion is considered Australia's biggest corporate takeover. But this could be overshadowed by retailer Coles Group's plans for a full sale or breakup of the A$19 billion (US$15.6 billion; euro11.5 billion) company.

© 2007 The Associated Press

By Rohan Sullivan, The Associated Press
Source: The Washington Post

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