Qantas shares have fallen 5c to $5.24 this morning as the market increasingly factors in the growing political risks surrounding the audacious $20 billion debt-laden private equity takeover.
Peter Costello and John Howard are quickly discovering there are political pit-falls all over the place with this deal and it now looks increasingly likely that a number of conditions will be placed on the sale.
Take foreign ownership, as an example of an issue where the government could take a stand. Macquarie Bank is deemed to be 100% Australian for the purposes of its 14.7% stake in Qantas, but people should remember that the Millionaires Factory is actually 30% foreign owned.
When you add in the foreign ownership components of All Finance and Allco Equity Partners, the two nominal cornerstone Australian investors, overall real foreign ownership of the voting shares goes above 50%.
Then you’ve got the sneaky voting and non-voting shares, which is similar to what Canada’s Asper family did to get around foreign ownership restrictions with Channel Ten.
Texas Pacific has a 25% voting interest and two board seats, but will nominally only have 15% of the votes, whilst Canada’s Onex has 12.5% of the shares and only 9% of the votes.
Texas Pacific is the world’s leading private equity investor in airlines and is represented in Australia by Ben Gray, a top Harvard MBA whose father is Robyn Gray, the former Tasmanian Liberal Premier who sits on the board of the PM’s favourite old growth wood chipping company, Gunns Ltd.
Robyn Gray knows plenty about risk and debt, having left Tasmania in a parlous financial position in the early 1990s. Gunns is also taking a huge risk borrowing the entire $1.5 billion for its proposed pulp mill.
Ben Gray met Treasury Secretary Ken Henry and Transport Secretary Michael Taylor to discuss the takeover yesterday and was presumably saying $15 billion-plus in Qantas debt was nothing to worry about.
The other joker in the pack here is Alan Jones. The Parrot hates Macquarie Bank but has been showered with cash and free flights by his Qantas mates Geoff Dixon and James Strong over the years. Will this be enough to buy his silence or will the 4,600 Qantas engineers get to him and spark a Snowy-esque campaign?