Qantas consents to acquisition bid

14 December 2006

The 86-year old Australian carrier Qantas, which yesterday rejected an $8.6-billion (A$10.9 billion) takeover bid from a consortium led by Macquarie Bank, made last month, today accepted a sweetened $8.7-billion (A$11.1 billion) offer, for which Macquarie Bank Ltd, Australia's biggest investment bank, has roped in the Texas Pacific Group.

The deal materialised after the initial rejection because the acquirers dropped some their earlier demands, including a break fee if the deal fell through. With the conditions being dropped, the deal was settled at $5.60 a share, just 24 hours after Qantas turned down the first offer of $5.50.

Moreover, the consortium has pledged not to cut back on unprofitable routes or divest the two airports that Qantas owns or outsource some 6,000 maintenance jobs to low-wage countries like India and China — an emotive issue with Labour politicians and labour unions.

Qantas is one of the few global airlines that continues to be profitable despite being hit by rising fuel and other costs.

The takeover is subject to regulatory approvals and shareholders' consent. The Qantas board has unanimously recommended that shareholders accept A$5.60.

The new owners of the airline, once the transaction is completed will be Macquarie Bank, Australian finance company Allco, US firm private equity firm Texas Pacific Group, and Canada's Onex.