Deutsche Bank has created a new dimension to the Qantas takeover this morning after declaring it had accumulated an 8.4% interest in the company – 4.8% through regular shares and an additional 3.6% through a derivatives position that doesn’t have any votes.
This follows on from a similarly complex update from UBS last night which lifted its stake from 8.94% to 10.4%, although only about 6% of this relates to the funds management operation and the rest is tied up with hedge fund clients.
As ASIC attempts to prosecute Citigroup over conflicts of interest and inadequate Chinese walls relating to Toll’s takeover bid for Patrick last year, we’re seeing similar issues arise with Qantas.
Deutsche Bank is one of the key bankers to Airline Partners Australia, which was asked over the weekend to relax some of the tough conditions on the $10 billion debt package for the takeover. Now a different division of Deutsche has emerged with a key equity stake.
This is not quite as complex as the UBS hat-wearing which sees it waiting for a $40 million advisory fee on the deal, holding about 4% on behalf of opportunistic hedge fund clients and then holding an additional 6% as part of its funds management operation.
Qantas shares are up 3c to $5.12 in a weaker market this morning as sentiment shifts marginally back in favour of the bid getting up. The key to this is APA’s bankers letting it drop the 90% acceptance condition.
If the Deutsche Bank lending team agrees to this, the Deutsche Bank equity team will make a tidy profit on the takeover succeeding, as will UBS Asset Management’s Paul Fiani who really should have been more transparent about his intentions.
Balanced Equity Management’s Andrew Sisson has taken the governance high road by not trading the stock during this uncertain period and then declaring a firm position not to sell his 4% stake last Friday.
It would be nice of UBS and Deutsche to do likewise, especially given these European investment banking giants have multiple exposures to the deal. All of this dealing merely serves to highlight the importance of having specialist fund managers without conflicts of interest.
Perpetual normally fits into that situation but then you have a situation like Coles where Perpetual director Sandra McPhee also happens to be one of the Coles directors who has botched the company.