Flight Centre receives privatisation offer

SYDNEY - Australia's biggest listed travel agent, Flight Centre Ltd, is seeking to privatise under a buy-out offer led by the company's founders and private equity firm Pacific Equity Partners.

Under the proposed deal, minority shareholders would be offered A$17.20 ($19.88) a share by the consortium, made up of a cash payment of A$17.00 a share and a fully franked special dividend of A20 cents.

The special dividend is conditional on the implementation of the scheme of arrangement following a shareholder vote.

The proposed offer, which values the company at A$1.62 ($1.87) billion, has the unanimous support of Flight Centre's independent directors, who plan to recommend it to shareholders in the absence of a better offer.

"We believe this proposal can unlock significant value for minority shareholders and that minority shareholders should have the opportunity to consider and vote on the offer," Flight Centre chairman Bruce Brown said.

"The offer of A$17.20 ($19.88) per share represents a significant premium to recent trading levels and broker valuations."

The offer represents a 39.1 per cent premium on the volume weighted average price of Flight Centre shares over the last three months.

It is a premium of 39.8 per cent on September 21's closing share price of A$12.30, before speculation emerged in the media on possible privatisation plans, the travel group said.

Flight Centre founder and chief executive Graham Turner, who will stay on as head of the company, said the public market was not the best structure to support the business currently.

"Given the uncertain and challenging outlook for the travel industry, we believe the public market is not the best structure to support the business in this period of its lifecycle," Mr Turner said.

"A privatisation of Flight Centre will enable us to reinvest in the company and continue to focus our business model in order to improve our responsiveness to rapidly changing industry dynamics."

He said the company's founders had chosen PEP to help build long-term value.

The consortium, which has been granted an exclusivity period to finalise negotiations and document the plan, will own all shares in Flight Centre through a joint venture company, Bidco.

The founders would sell some of their shares to Bidco for cash under the deal, and exchange the rest of their shareholdings for equity in the joint venture.

"The current negotiations between the parties contemplate that of the current 57.7 per cent of Flight Centre issued shares held by the founders, approximately 32.6 per cent will be acquired by Bidco for cash under the scheme of arrangement and approximately 25.1 per cent will be exchanged for equity in Bidco," the company said.

The founders' percentage ownership is anticipated to be "at least as large" as their current stake in the company, and they will receive a cash payment by Bidco of A$13.80 ($15.95) per sale share and special dividend.

- AAP