The power-packed Qantas board have now agreed to the wishes of the airline’s management team and accepted a revised $5.60 a share takeover bid, which values the business at a staggering $24 billion.

Forget all this stuff about Qantas being subjected to an $11.1 billion takeover. That’s just the equity. The latest Qantas balance sheet shows it carries a whopping $13.1 billion in liabilities and these have to be included when valuing any offer.

And don’t believe this rubbish about cash buffers. Macquarie Bank is shelling out $525 million for a 14.7% equity stake, meaning the total equity is only $3.57 billion and the total debt and liabilities will be more than $20 billion. Talk about being geared to the eye-balls.

No wonder there’s all this chatter about catering and the frequent flyer business being hived off. How else are they going to spend the promised $10 billion over five years buying 70 new planes?

Macquarie Bank’s team clearly understand the political sensitivities as they’ve rolled the PM’s great mate, former Telstra chairman Bob Mansfield, as spokesman for the bid vehicle, Airline Partners Australia.

The bidders are paying way too much if Qantas loses its government protection and this is the biggest risk they face, especially in an election year which could put a union-backed Labor Party back in power.

However, any Federal Government would know that exposing a debt-laden Qantas to the full blast of competition would cause its collapse – and nobody would want that, least of all the unions.

The AWU and AMWU have responded ferociously to the proposal knowing full well that the private equity jackals will want to stamp out the closed shops and featherbedding that still characterise much of the Qantas business.

Whilst the bidders are promising “business as usual” on sensitive issues like the location of maintenance and heavy engineering operations, it is clear that the low-cost Jetstar model will be used for international expansion.

CEO Geoff Dixon will be walking an extraordinary political, financial and industrial tightrope over the coming years and we really should be told exactly how the “management team’s” 1% equity stake, worth $111 million, is being financed.

Are they getting it for free, based on a successful exit in five years? The board will walk away with nothing but the sale of their shares at $5.60, but management have clearly been given huge inducements to go along with this high risk ride.

Peter Fray

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