QANTAS being taken over by Macquarie Bank..

[Takeshi]

Todays Australian Newspaper had a story about Qantas Catering to be sold to either Gate Gourmet owned by TPG boss, or LSG Skychefs.
It also said that Dixon says they have no plan to sell the Catering arm, they instead agreed to retain it and restructure it in June this year, as they saw more value by doing this.

The consortium also stronly quoted that they have no plans for any Asset Sales in the buyout plan..... yeah right, we should believe this?????? NO!!!!

This whole thing is very suspicious, what can this mob do that Dixon cannot.

If they told Dixon, he will get nothing from the deal, and also no job with the deal, would he really want to sell Qantas ????? ............ NO

Lets hope Costello saves Qantas from becoming another Ansett.

 

[JohnK]

Re: Qantas T/O Bid question

Umm - do you have evidence of this?

I don't have any evidence. Do we any evidence on their real intentions?

If you look at APAs stated goals of 20% profit expectation and assumed listing of QF as public company again in 5 to 10 years then the logical and easiest way to make money would be to strip QF of assets, sell as many areas of QF as possible and then load the rest of the company with debt before public listing.

Do I know this will happen for a fact? No. Do I think that this is the most likely scenario? Yes.

 

[oz_mark]

Interesting article from across the seas about this.
See: Is It Numbers Up For High Rollers (from Sunday Herald)

Is it number’s up for high rollers?


HOW HIGH can private equity fly before the wings fall off? That is the trillion-pound question following the Macquarie Bank-engineered £5.4 billiontakeover of Qantas Airways, a deal that relies heavily on the worldwide availability of cheap money.

The takeover is a typically, highly leveraged "Mac Bank" transaction that takes Qantas's historically safe levels of debt straight up into the jet stream. If the deal clears Australian regulators, which is by no means certain, the new owners will take the airline's net borrowings from £1.9bn to between £4bn and £4.8bn.

After being safely managed from its earliest days to become one of the world's best airlines, the "flying kangaroo" - a business created with a combination of taxpayers' and public shareholders' money - will overnight be loaded to the wing-tips with private-sector borrowings. "The deal is all about debt," pointed out one banker, who wished to remain anonymous.

 

[JohnK]

Interesting article from across the seas about this.

Great article. Macquarie Bank does not get a glowing report.

But who wins in these private-sector deals? Well, Macquarie Bank certainly does. Its winning, revolutionary formula is based on buying an asset and locking itinto a trust that it then runs by pocketing a steady cashflow for providing advice, management skills and the achieving of performance targets. Critics may note that this is the opposite of reinvesting profits in the business, but it is a strategy that enables an institution that hardly anybody outside the financial sector had heard of a decade ago to run worldwide assets worth more than £57bn.

Because Qantas is a publicly owned company restricted by law, this deal has required the consortium to reveal more than would normally be the case, offering an insight in to how private equity works. According to analysts at JP Morgan, Mac Bank intends to extract much more than £200m in fees and other income during the life of its investment in the airline,which is higher than the infrastructure bank's total investment in the project.

The fruit starts dropping as soon as the deal is approved with a fee of £52m for advice, underwriting and packaging the debt. Thereafter, it is expected the consortium will collect further fees for hiving off Qantas businesses such asits Frequent Flyer programme worth around £800m and for the occasional refinancing of debt that is typical of similar deals. It is also certain that, by the time the consortium hands back Qantas to the stock exchange and public shareholding, most of the fruit will have been plucked and shared among the financiers. One commentator calls this "a seismic shift of wealth from the many to the few".

Meantime, Mac Bank cheerfully continues to pursue a global strategy. Having recently paid £250m for an 11% stake in Thames Water and another £263m for Stagecoach, it has a further £3.6bn available to pump into property this year, mainly in North America and Asia.It already owns shopping malls in China, toll roads and airports in Britain and other countries, golf courses and fund managers in the United States, a power station in Korea and retirement villages in Canada, among numerous other assets.

In Mac Bank's home country, it is becoming harder to get out of bed without boosting the bonuses of the "millionaires' factory", as it is known for the huge bonuses it pays. It owns carparks at Sydney International Airport, toll roads and taxi services, investment funds and office blocks. This is why the institution's profits are rocketing up an incredible 51% to £292m for the six months to September.

 

[QF WP]

This is the story to which you are referring:

International airline caterers Gate Gourmet and LSG Sky Chefs are tipped as the most likely buyers of Qantas's in-flight food business, if the private equity consortium offering $11.1 billion to buy the airline decides to sell non-core assets...

Todays Australian Newspaper had a story about Qantas Catering to be sold to either Gate Gourmet owned by TPG boss, or LSG Skychefs.
It also said that Dixon says they have no plan to sell the Catering arm, they instead agreed to retain it and restructure it in June this year, as they saw more value by doing this.

The consortium also stronly quoted that they have no plans for any Asset Sales in the buyout plan..... yeah right, we should believe this?????? NO!!!!

This whole thing is very suspicious, what can this mob do that Dixon cannot.

If they told Dixon, he will get nothing from the deal, and also no job with the deal, would he really want to sell Qantas ????? ............ NO

Lets hope Costello saves Qantas from becoming another Ansett.

 

[Takeshi]

Today APA announced that FF will NOT be sold off ?? Also they stressed they have no plans to breakup the Airline ???

Do we believe all this ? can they just say this ? then when the dust settles they do what they want ?
What leg have we to stand on when this happens?

I am not sure how all this works.

 

[simongr]

OK - just to address one point first - we dont have a leg to stand on. APA could buy the airline and close it down if they wanted to. Unless you are a major shareholder in APA or one of the banks providing finance you have no rights.

Jjust in relation to "not breaking up the airline". That is a very wooley statement. That could mean anything from not not separately floating JQ to not outsourcing services. I personally would not include the outsourcing of services as breaking up the airline.

S

 

[ethernet]

Budding MBA's might want to do SWAT analysis on how to whistle up 10% more 'productivity dividends' from the takeover, given QF is already efficiently run. The quick low hanging fruit is FF milage points, but a recent re-org has already slashed entitlements. It will be tempting to do a 'baggage handlers AWA' on pilots and hosties, and prior deals show they have 'form'. Reducing seat spacing, or putting older planes/hacks may get spotted by observant flyers.

The unknown is whether the USA restrictions will be lifted, which is a 25% threat. Obviously they are counting this special non-free trade protection will continue. Which leaves cut and slash caretaking with steady price hikes and a quick refloat at the right time as the most probable strategy, especially as the capital gains are NOW tax fee (Aussies excluded). In all it looks like a smart deal where actual tax paid can be reduced to a single digit number, while supplying more 13% options to the club.

The posts on this forum seem to hit the nail on the head, except they seem to have missed the tax angle (Or doing something with superannuation money provisions).

 

[Takeshi]

So they can say that FF will not be sold off, ands that No assets will be sold off.

This means nothing unles its in writting, and even then it means nothing correct ?

The only way will be for the Government to put conditions on the new owners, just like it did with ANZ taking over Ansett.


But will Macbank and partners like to have a business that they cannot expand or do as they like, because the government said they cannot ?

I really would love to know APA's plan in this very expensive purchase.

How are they going to return a good profit without selling of most of the Airlines departments ? how I would really love to know.
Maybe they have had secret talks with another airline, and will merge with them creating a megacarrier ??? why hasn't Qantas done this already?

This whole deal looks very strange, they must have something up their sleeve.
They won't look good if they say NO asset sales then 6 months down the track the 4 sale signs come out, which I am sure they will.
FF 2 billion, Catering 400 million, Holidays ???, and Terminals ???
This has been Dixons plan all along, to just fly planes.
All the other stuff will be done by cheap asian labour, just like it is in every other airline,
No airlines have their own service staff, its all contracted out .

I would love to know what their plans are for Qantas??

 

[oz_mark]

I suspect some of the answer to how they will extract their return lies in the financial manipulations. Take a company undervalued in the market, with relatively low debt levels and a high cash flow, then rework all its financials (high debt funded by the high cash flow (which in turns means lower profit and thus lower taxes being paid)) and I think you get at least some of the improved returns. And that is without restructuring in any way.

Unfortunately, I am not a financial type person so I can't quantify any of the above, but from what I can tell, seems to be the general idea of how they expect toget the returns they are after.

 

[pauly7]

I wouldn't mind seeing Jet* cut loose

Hopefully a cashed up Qantas would then re-enter some Jet* markets and blow them away.... wishful thinking maybe!

 

[straitman]

I wouldn't mind seeing Jet* cut loose

Hopefully a cashed up Qantas would then re-enter some Jet* markets and blow them away.... wishful thinking maybe!

At least it's a good dream and not a nightmare :!:

 

[JohnK]

I really would love to know APA's plan in this very expensive purchase.

....

This whole deal looks very strange, they must have something up their sleeve.

....

I would love to know what their plans are for Qantas??

QF in APAs hands will never be QF again. YMMV!

 

[Kiwi Flyer]

How are they going to return a good profit without selling of most of the Airlines departments ? how I would really love to know.

Perhaps you could read this thread? Several posts have pointed out ways a significantly increased return on equity can be easily achieved.

 

[QF WP]

A majority of Aussies believe the proposed takeover of Qantas by a private equity consortium should be blocked, a new poll says...

 

[simongr]

Thats very interesting - if a very thin article. I guess the opposition is dropping as its less in the news.

This was hilarious:

The Roy Morgan research also finds a significant chunk of opposition is based on the false premise that the airline is either government controlled or 100 per cent Australian owned.

 

[Yada Yada]

Thats very interesting - if a very thin article. I guess the opposition is dropping as its less in the news.

This was hilarious:

Originally Posted by The Age
The Roy Morgan research also finds a significant chunk of opposition is based on the false premise that the airline is either government controlled or 100 per cent Australian owned.

As I've mentioned in previous posts, Qantas continued to market itself as "the national carrier" long after it became a private company, so they only have themselves to blame for promoting this false premise.

The debate has waned a little although I saw the following artlice this morning:

More competition for Qantas: Joyce - Australia - Travel - theage.com.au

Nationals senator Barnaby Joyce has called for Qantas to face more competition on the lucrative Australia-US route if it is taken over by Airline Partners Australia.

Senator Joyce said the private equity consortium was of ''indeterminate nationality'' and therefore deserved no special treatment from the federal government.

The Australia-US route is currently flown by only Qantas and United Airlines, with Singapore Airlines continually calling for access to the route.

''To continue the special treatment, if Qantas was taken over by a private equity group, would be giving the equity group favoured treatment,'' Senator Joyce said in a statement.

 

[QF WP]

Nice ballsy move Barnaby. Give the man credit for not backing the consortium in the buying process and at the same time, even if they are successful, putting a stumbling block in their future plans (quest for profits) based on the status quo remaining unchanged. That should keep them busy, crunching sensitivity analyses for a while...

 

[Tooner]

''To continue the special treatment, if Qantas was taken over by a private equity group, would be giving the equity group favoured treatment,'' Senator Joyce said in a statement.

Note the "continue"? So that means us current shareholders (including the 49% of shareholders who may not be Australian) do get special treatment .

 

[oz_mark]

Qantas deal is do or die, says think tank

From The Australian

Qantas deal is do or die, says think tank | Aviation | The Australian

THE ambitious $11 billion buyout bid from Airline Partners Australia (APA) to take Qantas private will succeed, if only because of the dire consequences of failure, the region's leading aviation think-tank says.

Centre of Asia Pacific Aviation founder and executive chairman Peter Harbison says "the consequences of failure are too grotesque to imagine. "If the deal is knocked back, there would be a massive loss of confidence and the share market would bale out of the stock sending the share price below last year's lows."

Mr Harbison warned yesterday that Qantas is a child of regulation, and as that protection is removed through liberalisation so it would progressively wither on the vine.


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