The stockmarket is up again strongly this morning, reaching its highest point in March as the All Ords pushes back towards 5900. This is good news for everyone except the Qantas privatisation buyout team, which has just 11 more business days to land 90% of the airline.
Today’s shareholder notice has Airline Partners Australia lifting its stake by 1.54% to 20.9% so it will seriously need to build momentum in the dying days of the bid before it closes on 3 April.
Whilst stocks were up across the board today, Qantas was steady at $5.15, a 30c discount to the bid price, suggesting a serious risk it will fail.
News Ltd’s Terry McCrann has been writing some excellent columns on private equity and Qantas and today he opened as follows:
The Qantas directors must revisit their decision to recommend the private equity takeover; they should almost certainly withdraw their recommendation.
McCrann goes on to make a compelling case about last week’s “extremely churlish” profit update which was indeed mischievously negative given the unprecedented profit sweet spot that Qantas is hitting right now.
Qantas CEO Geoff Dixon has been crying poor for years about the airline’s fortunes as he attempts to screw the unions and maximise government protection. Now he’s trying to deprive his own shareholders of fair value when he and the 38 executives that have signed on for free equity have a massive conflict of interest.
Whilst McCrann has erred in suggesting APA should switch to a scheme of arrangement, something I hear is now being explored but which would clearly breach the Corporations Law, he is absolutely right about the global re-rating of airline stocks.
Virgin Blue has gone from $1.50 to $2.60 since last August and over the same period Qantas has risen from $2.90 to $5.15.
Even little Regional Express has soared from $1 to $2.10, suggesting that even with a supposedly generous takeover premium, Qantas shareholders aren’t exactly getting a generous deal based on today’s information.
If APA is smart they would release profit breakdowns on the domestic and international operations to the market, make the bid unconditional, grab what they can get until 3 April, top it up on the market through April and then come back with a higher mop-up bid in May.
If Geoff Dixon resigned as CEO after 3 April to join APA it would make things very interesting indeed for the institutions that refuse to sell.