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Macquarie Bank and its buyout partners have abandoned plans to revive a takeover bid for Qantas Airways after shareholders rejected their A$11.1 billion ($12.5 billion) offer for Australia's largest airline as too low.
The group said yesterday any new bid would probably fail after reporting on May 8 it was "exploring a number of alternatives, including the possibility of making a renewed offer for Qantas".
Macquarie and partners including TPG would have needed to submit a new bid to Australia's Foreign Investment Review Board and may have faced hostility from lawmakers and employees concerned the airline could be broken up and jobs moved overseas.
The decision not to launch a fresh bid for the Australian icon, dubbed the flying kangaroo, had been expected given a lack of support from the Qantas board, the need to negotiate again with bankers and an upcoming Australian election, said Shaw Stockbroking analyst Brent Mitchell.
"At some stage they may look at it again, but there's a lot of deals around and these people have various interests," said Mitchell, adding that a rival bidder was unlikely.
"I imagine any other suitors have been scared off," said Hans Kunnen, at Colonial First State Global Asset Management in Sydney. "Qantas is now trading on its own two feet without the threat of a bid, with the expectation management can do a decent job."
Some investors turned against the A$5.45 a share cash offer after Qantas forecast profit to almost double by 2008 as it carries more passengers and jet fuel prices fall.
The airline raised its earnings forecast twice after accepting the buyout offer in December. Pretax profit may almost double to A$1.23 billion in fiscal 2008, from A$671 million in the 12 months ended June 30, 2006.
Shares of Qantas fell A3c to A$5.25 at the close of trade in Sydney. That's still 20 per cent higher than before Macquarie's takeover approach was revealed on November 22. The S&P/ASX 200 Index has gained 19 per cent over the same period.
"The fact that it hasn't tanked back to somewhere near the A$4 mark would suggest shareholders are comfortable with the earnings outlook," said Kunnen.
Melbourne-based Allco Equity Partners, Allco Finance Group and Canada's Onex Corp were also members of the bidding group.
It let its bid for Qantas lapse on May 8 after failing to get 50 per cent of the airline's stock. The group raised the offer once and eased the terms three times as it sought to win investor support.
The Qantas bid started to run into resistance in March when Melbourne-based fund manager Balanced Equity Management said it wouldn't sell its 4 per cent stake and the Australian Financial Review reported UBS Global Asset Management wouldn't accept the bid for its 6 per cent stake.
"This bid is definitely done, there are too many obstacles for a bid to go forward," said Sarah Percy-Dove, head of credit research at ANZ Investment Bank in Sydney. The board of Qantas might decide to increase the airline's debt to boost shareholder returns and discourage potential bidders, she said.
Under the buyout proposal, the ratio of net debt to its earnings before interest, tax, depreciation and amortisation would have tripled to 2.8 times.
- BLOOMBERG, REUTERS
