Quantas Shares Fly High after Takeover Bid

Shares of Australia's Qantas Airways soared to a record high on Wednesday after it was approached by Australia's biggest investment bank, Macquarie, and US-based private equity firm Texas Pacific Group for a buyout.

In a brief statement to the Australian Stock Exchange, acting Company Secretary Cassandra Hamlin said the company “has received an approach by Macquarie Bank and the Texas Pacific Group on behalf of a consortium they represent.”

“The approach is confidential and incomplete and is being investigated by Qantas,” the statement stated.

The Macquarie-led buyout offer, possibly worth A$10.3 billion (more than US$8 billion) sent Australian airline’s shares up 15 percent yesterday. Qantas shares soared to a record A$5.25, before closing at A$5.00. The offer also lifted the value of the airline to nearly A$10bn.

Qantas shares had traded as low as A$2.93 five months ago.

Astonished with the unique buyout proposal by the equity firms, James Holt, a portfolio manager with Zurich Financial Services, which holds about A$10 million worth of Qantas shares, said, "This has come as a complete surprise as it is not the usual candidate for private equity."

The bid is referred as unique because private equity groups had been looking for cash-rich retail and media assets like Publishing and Broadcasting and Seven Network television in Australia recently.

However, Fort Worth-based private equity firm Texas Pacific has always hunted for airlines.

Meanwhile, the recent bid has triggered concerns that the ownership of Australia's oldest and biggest airline could pass into foreign hands. Ina statement, the Australian Manufacturing Workers' Union (AMWU) said, "We are very concerned about this proposal for a takeover. Qantas is an iconic Australian company. There are matters of national interest that surround Qantas."

Analysts said the bid has to face a number of hurdles to get successful, including a foreign ownership cap that restricts an individual foreign shareholding at 25 per cent and total foreign ownership at 49 per cent. Moreover, AMWU wants the Federal Government to commit there will be no job loss if Qantas is taken over.

Reassuring the country that the law would stay and Qantas would retain its Australian dominance even if the airline was sold offshore, the country’s transport minister Mark Vaile, said, "I think I can confidently predict you will never see the kangaroo moved off the tail of Qantas aircraft."

"I think that there will always be a significant level of Australian ownership and obviously given the foreign ownership cap there will always be a majority Australian ownership of Qantas," he added.

At the same time, the Macquarie Bank said that though the discussions are currently at preliminary stages, but if the proposal goes firm, the bank will comply with foreign ownership regulations.