Singapore speeds Ansett takeover

By ROB O'NEILL

Air New Zealand's takeover of Ansett Australia is expected to be complete by the end of the month now that it has the backing of Singapore Airlines.

The process appeared to have slowed down with Australian regulatory agencies considering conditions they might attach to the deal.

Brierley Investments chief executive Greg Terry told Dow Jones last night that Air New Zealand's acquisition of the 50 per cent of Ansett Australia that it did not already own would be on target by the end of the month.

Earlier the vendor, News Ltd, had said regulatory approval may take until June.

Meanwhile, the Australian Services Union, which represents a range of Ansett clerical staff, is understood to have wrung a contract from Ansett's management that may frustrate a rapid restructuring of the airline by Air New Zealand.

Union assistant national secretary Linda White said changes to the Air Navigation Act have facilitated the proposal, but amendment motions from the Federal opposition and comments from the transport minister suggest conditions will be placed on any approval.

The financial muscle Singapore Airlines brought to Air New Zealand alleviated some employee concerns, Linda White said.

Air New Zealand chairman Sir Selwyn Cushing was not available to comment last night.

Meanwhile, having finally secured a 25 per cent stake in Air New Zealand, Singapore Airlines has broken its silence over its ambitions for our national carrier.

``Over the last few months I've been conspicuous by my silence on our interest in Air New Zealand,'' said the airline's deputy chairman and chief executive, Dr Cheong Choong Kong, yesterday.

``Now that the deal's been done you will find me a lot less inhibited.''

Dr Cheong said Singapore Airlines' long-term objective was to create a global airline group. The first step was the acquisition of a 49 per cent share of Virgin International. Air New Zealand is another step towards that goal.

Singapore Airlines is set to acquire Brierley Investments' 16.7 per cent B-class shareholding for $285 million, taking its holding to 25 per cent, the maximum the Government will allow it. The shares were acquired at $3 each conditional on regulatory approval, due diligence and the completion of Air New Zealand's buy-out of Ansett.

Brierley, however, could reap up to $4 a share under an earn-out clause in the contract.

If Air New Zealand increases earnings before tax, interest and depreciation by 30 per cent, Brierley will gain another 50 cents a share. An increase of 65 per cent will gain the maximum $4 payment.

Sir Selwyn is seeking savings of up to $100 million a year from the acquisition of Ansett. Dr Cheong declined to put a figure on the further synergies he saw accruing from Singapore's involvement.

Dr Cheong said yesterday that Singapore Airlines would support Air New Zealand's planned rights issue to fund the Ansett Australia buy-out, as well as any other calls for financial support ``where justified.''

The Business Herald understands international management consultancy McKinsey is handling the integration of the two companies.

Dr Cheong confirmed Singapore Airlines was seeking further increases in its Air New Zealand exposure.

``We haven't made any official application for a stake beyond 25 per cent. It still remains our hope that at some appropriate time we will succeed in persuading the New Zealand Government to let us go beyond 25 per cent.''

Last week, however, Transport Minister Mark Gosche said the Government had no plans to liberalise the A share structure.

With Brierley Investments now based in Singapore and still holding 30 per cent in A shares and Singapore Airlines holding 25 per cent, local ownership increasingly appears a polite fiction.

Singapore Airlines will gain either three or four seats on Air New Zealand's expanded board of 14.

It also appears Virgin Australia will have to go it alone or find a new partner as Singapore lets its option to join the cut-rate carrier on Australian domestic routes expire.