Qantas Stock Slips on Bid Collapse
AP | May 09, 2007
A takeover bid for Qantas, one of the world's most recognizable airlines, finally collapsed on May 8, pulling the company's share price down sharply.
Shareholders - believed to include international hedge funds that stockpiled Qantas shares recently in hopes of making quick profits on the AU$10.8 billion takeover - dumped the airline's stock when trading resumed for the first time since a chaotic long weekend surrounding the buyout attempt.
Qantas shares plummeted more than 4 percent in the first hour after a trading halt was lifted before recovering a bit to close 3 percent lower at AU$5.22, with a massive volume of nearly 165 million trades.
Analysts said they expected the shares to be extremely volatile for some time, but noted that Qantas' underlying economic position was strong and the price may settle above the failed offer price from Airline Partners Australia of AU$5.45 per share.
MM&E Capital analyst Tom Elliott said the prospect of another takeover bid - APA said it was considering it - probably saved the share price from falling further.
APA, a private equity-backed group led by Macquarie Bank and US buyout specialist TPG, said May 8 that it would not pursue a legal loophole that may have allowed it to reach a minimum shareholding threshold before a deadline on May 4 - conceding defeat after earlier flagging a legal battle that may have lasted months.
APA said it won 46 percent of shares by the deadline. It needed 50 percent to win a two-week extension to try and garner the 70 percent it needed to seal the deal.
APA said although it could claim it reached the threshold under a clause in its offer documents that required shareholders who agreed to sell all of them, it would not do so as it did not want the turmoil to continue.
"APA has decided not to pursue arguments that it did achieve voting power in excess of 50 percent by the offer deadline," the group said.
"APA believes that Qantas shareholders need more certainty and accordingly, it has determined that its bid should be treated as having lapsed on May 4, 2007."
The Australian Securities and Investment Commission said it had responded to APA's comments by completing paperwork that "put beyond doubt" the end of the bid "in the interest of market certainty."
Qantas chairwoman Margaret Jackson, who faces growing pressure to quit for strongly backing APA's offer, confirmed it was dead and said any new bid would have to start from scratch.
The board met May 8, with Jackson saying the "foremost priority of the board and management now was the continuing successful operation of the company."
"This has been an extremely difficult process since the board decided to recommend APA's bid to shareholders," she said.
Ian Curry of the Australian Shareholders Association, which represents small investors, said Jackson should quit "on the grounds that she neglected the interests of shareholders; she promoted and pushed and coerced shareholders to sell."
Said Curry: "The Qantas board has aligned itself with the offerer and must be accountable for some of the muck-up that has occurred."
On May 7, the Australian government warned Qantas it must comply with laws that ban foreigners from owning more than 49 percent of the airline, amid concern that offshore hedge funds may have become a majority bloc in the final days of the bid. Qantas must be Australian-owned by law.
"We expect the Qantas board to manage that," Treasurer Peter Costello said "If the Qantas board hasn't done that, then the Qantas board will need to have a good explanation."
Qantas said it was urgently reviewing the level of foreign holdings.