Is it time to call the Qantas takeover bid a failure? The stock is down another 4c to $5.08 in a stronger market this morning creating an unprecedented 37c discount to the $5.45 offer price.
The number of financial, political and media types lining up against the bid is rising by the day, but Terry McCrann had the best explanation of why it will fail today. McCrann’s house analogy is spot on. Why would you sell a great house if it was very difficult to find another suitable house to replace it?
Andrew Sisson’s Balanced Equity Management is the third largest Qantas shareholder with about 4% and is said to have concluded that he won’t be selling.
Sisson looks after about $9 billion from its Collins Street office and if he accepts
the bid he’ll have to redeploy about $450 million into other investments, after paying a hefty tax bill.
Given that the market has risen 8% since the $5.45 offer was first announced, hanging onto Qantas looks increasingly attractive.
Sisson is ASIC’s star witness in the Citigroup case and is highly regarded in financial markets despite having very little profile. He’s admired for being beholden to no-one and has amassed a fortune estimated at more than $300 million even though he’s never made the BRW Rich List.
The former Axa fund manager has been running his own show for almost two decades and will make a rare public outing at the ISS annual conference at the MCG on Friday, where he will be on a panel with ASIC deputy chair Jeremy Cooper and ASX regulation boss Eric Mayne.
The likes of Sisson, UBS asset management boss Paul Fiani and Maple Brown-Abbott are absolutely right to reject the Airline Partners Australia bid in the absence of a forecast for 2007-08.
Why the hell should these Barbarians get the inside run on all the leases, hedging contracts and the like when the owners are not even being offered a forecast by a business that has recently been upgrading its profit outlook for the
current year every couple of months?
Southern Cross Equities stockbroker and Eureka Report columnist Charlie Aitken is another influential figure in the market who has taken a strong stand against the takeover bid.
Aitken has crunched the numbers and is urging investors to reject the deal, again on the basis that there is no better value elsewhere.
“Why would I accept an offer on 12.6 times next year’s prospective consensus earnings, pay capital gains tax, and also give up a 4.5% fully franked yield stream?” he asks.
Barring a market meltdown before the bid closes on 3 April, I think he’s right – the $11 billion private equity bid for Qantas should and will fail to reach the 90% acceptance level.
When that happens, they’ll have some very tough decisions to take. Walking will cost tens of millions and loads of embarrassment whilst having minority shareholders will breach the financing agreements.