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MELBOURNE - Australia's Qantas Airways has agreed to a sweetened A$11.1 billion ($12.59 billion) buyout offer led by Macquarie Bank Ltd. and private equity firm Texas Pacific Group, sources said today.
The offer of A$5.60 a share, 10 per cent above Qantas's last trade, was unanimously endorsed by the Qantas board after the bidders dropped their demand for a break-up fee, sources close to the transaction said. The board had rejected an offer of A$5.50 on Wednesday.
"I think it's a reasonable price, given where Qantas was trading till recently," said Allianz Global Investors analyst Joh Snyman, adding that he was waiting to see what conditions were attached to the bid.
Analysts have said an offer of A$5.50 or more was likely to be acceptable to most Qantas shareholders.
No immediate comment was available from Qantas, which had scheduled a news conference for 11.00am (1.00pm NZT).
The offer price is 29 per cent higher than Qantas's share price before the airline said on November 22 that it had been approached with a buyout offer.
The bid values Qantas at 15.9 times forecast earnings, compared with regional rivals Singapore Airlines Ltd. trading at 12.9 and Cathay Pacific Airways <0293.HK> at 17.8, according to Reuters data.
The bidding team has been shaped to ensure it meets ownership caps on Australia's flag carrier, which require the airline to remain majority Australian-owned, with no individual shareholder owning more than 25 per cent.
The consortium, Airline Partners Australia, includes Allco Equity Partners with a 34 per cent stake, Allco Finance Group with 11 per cent, Macquarie with less than 15 per cent and Canadian investment firm Onex Corp. and Texas Pacific with a total of less than 40 per cent.
Texas Pacific stands out among private equity firms in that it has a history of investing in the airline industry. It rescued Continental Airlines from bankruptcy in 1993 and has held stakes in the former America West and Ireland's Ryanair Plc.
Allco Equity Partners said that if the bid went ahead, it would seek to raise between A$600 million and A$700 million, mainly from existing shareholders.
Qantas chairman Margaret Jackson and managing director Geoff Dixon, known for their close ties to the conservative coalition government, are expected to lead the effort to persuade Canberra that the deal is in the national interest.
The government has only once before blocked a takeover on national interest grounds, stopping Royal Dutch Shell buying Woodside Petroleum Ltd. on fears that Shell would develop offshore projects ahead of Woodside's local gas projects.
The consortium will have to win over the US and European arms of US fund manager Capital Group, which together own 12.7 per cent of Qantas, as the bid is conditional on securing 90 per cent acceptance.
Shares in Qantas, Allco Finance and Allco Equity Partners were put on a trading halt today ahead of an announcement.
- REUTERS
