2000 share Qantas investor Dr Vincent O’Donnell writes: First, I am a nationalist. If Qantas wants to trade as the national flag carrier and enjoy preferential advantage, it must be owned by either the Commonwealth government or by a lot of Australians. While the majority of APA’s board may carry Australian passports, the money they represent has no nationality and no loyalty other than to its foreign rent seekers.

Second, I am selfish. I like being the owner, albeit a very small owner, of a national icon and I want my daughter to inherit my small slice of national pride. Also, I strongly object to being forced to realise a capital gain on my share holding, rather than enjoy future dividends. Worse still, I strenuously object to having to pay tax on the capital gain when I would prefer it to remain in the company.

Third, I am suspicious. If APA can offer $5.45 a share and expect to recover their investment from future value with the same senior management team, why isn’t the same management team doing that for the existing shareholders? Has the existing senior management team slacking off in the expectation of future bonuses?

Fourth, I am sceptical of the advice of a board that stands to profit nicely from the deal. How “independent” is that? A fiduciary duty involves trust and a board all singing from the same hymn sheet doesn’t inspire trust. In addition, their fiduciary duty is not sufficiently discharged by assuming that maximising shareholder value can be measured in dollars alone.

Fifth, we bear the risk but lose our premium. APA implicitly wants Australia to assume the risk of failure of their high geared takeover without offering a risk premium. Sure, they say they have quarantined a fund to deal with down turns in the industry and they can opt to defer interest payment into bonds (more overseas debt) but they want to trade as Australia’s flag carrier. If they go belly-up, a future Australian government will have to bail them out with our money. In the meantime, the revenue stream, by way of corporate taxation that would go a part the way to compensate for that risk pours into the pockets of the overseas rent seekers who are funding this buyout.

Finally, the snowstorm of mail demanding my capitulation and the smokescreen of agreements shot through with unenforceable conditional clauses like “support regional capacity growth and regional network improvement in line with market needs” and “track record of offering competitive conditions, jobs growth, career opportunities … will continue in line with market conditions”, deepens my resolve.

In aviation, pilots have a saying: The two most useless things are the air in the fuel tanks and the runway behind you. We have a third now: APA’s bid for Qantas is useless to Australian aviation.

Wayne Robinson writes: Personally, I won’t be accepting the takeover offer for my shares in Qantas. The attraction of shares as an investment is that I can (usually) sell them when I want to. The thought of having to pay 25% of the capital gains this financial year in tax (and I’d have to spend a lot of time and effort having to calculate how much profit I would have made, since I’ve bought shares on market and as a dividend reinvestment whenever available, in addition to the original float shares) doesn’t fill me with much anticipation. Also, I don’t need the cash now, this year. What would I do with it? Probably spend it, as I did with the proceeds of the compulsory acquisition of my Western Mining shares last year. 

QF545 writes: In response to your article titled “Is it time to call Qantas takeover bid a failure?“. I too, like yourself, am closely watching this bid unfold and would like to clarify the facts as they stand.

Andrew Sisson’s Balanced Equity Management has not concluded that he won’t be selling. It has publicly said it’s still deciding. Refer Andrew Sisson’s comments in The Australian on 10 March 2007: “we are still in the process of making up our minds”. Further to this, UBS has never said it is going to reject. Maple Brown has actually (like yourself) sold down its stake in the market from approximately 4% to 1.7%. Therefore I find your conclusions a little premature.

I respect all shareholders’ rights to accept/reject this deal. I think you should do the same and leave it up to the experts to decide rather than report incorrectly on their behalf.

I challenge any investor to explain why they would prefer to hold Qantas shares over taking $5.45 cash now. Volatile oil price, uncertainty over A380 project, likelihood we are nearing the top of the economic cycle and the imminent threat of terrorists. I am taking my $5.45 cash. If there is an investor out there who can forecast Qantas’s fate over the next 12 months I would also like to ask them who is going to win the 2007 Melbourne Cup.

To answer your question, “Is it time to call Qantas takeover bid a failure?”, the answer is no. And I suggest you buy back your 100 shares!

Peter Fray

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