The faxes are pouring in from hedge funds all over the world today as the $11 billion Airline Partners Australia takeover bid for Qantas struggles to stay alive.
Today’s shareholder update shows APA has lifted firm acceptances from 27.78% to 34.59%, thereby repeating the 7 percentage point gain from yesterday.
However, more than half of today’s increase came out of the institutional acceptance facility which dropped from 5.19% to 1.44%.
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That means the final day must yield 16% to reach the magical 50% level that would trigger an automatic two week extension. History suggests this is likely to occur given that more than 30% of MIM shares were accepted on the final day of the Xstrata takeover offer in 2003.
Hedge funds like to keep their options open as long as possible so a flood of last day acceptances is the normal practice.
However the big hedge funds represented by the three other Qantas substantial shareholders – Deutsche Bank, UBS and Credit Suisse – won’t want to tender all of their shares because they would then lose control of them.
The most likely scenario is that APA will just crack the 50% level but hedge funds will still be left with about 20% of Qantas. Not much will happen until the last day before the offer would finally close on 18 May, although the smokey in the pack would be APA receiving bank approval to lower the minimum acceptance level from 70% to 50%.
Qantas shares rose 3c yesterday and crept up another 1c to $5.38 this morning, suggesting the $5.45 bid will still be alive on Monday morning when we’ll begin another game of cliff top poker to see if the 70% minimum acceptance level can be satisfied after the two week extension.
The announcement by Tiger Airways that it is looking to hire 1,000 people in Melbourne and will operate out of Tullamarine is likely to spook a few recalcitrant shareholders into accepting the offer.
After all, if things go pear-shaped Qantas, the minorities could find themselves in an AMP-GIO situation where the subsequent mop-up bid was priced at almost half the original offer.
However, there’s not much prospect of that at the moment as Qantas enjoys unprecedented prosperity.