QANTAS being taken over by Macquarie Bank..

[simongr]

The sale and lease back is perfectly reasonable. QF will be generating lots of profit and paying heaps of tax. APA will be generating heaps of losses on the debt it is suffering under. APA buys the planes and leass back to QF - this generates operating income which can be used to offset the interest payments and thus pay no tax (interest = income thus no taxable income) - QF then offsets lease payments against taxable income and also pays no tax

A tad simplistic I know but completely legal.

Sale and leasback arrangements have been around for many many years and accounting standards have been designed to make them more transparent to the reader of financial statements so that the underlying nature of financial performance is clear.

Why should anyone go to jail for this?

 

[Tooner]

Sale and leasback arrangements have been around for many many years and accounting standards have been designed to make them more transparent to the reader of financial statements so that the underlying nature of financial performance is clear.

Why should anyone go to jail for this?

In fact, Ansett, Australian Airlines and Qantas used to make significant profits from placing deposits on aircraft, financing them with triple dip cross border operating leases for 125% of the original purchase price and then getting the deposits back or rolling them into new purchases and repeating the process.

Worked well for a while at least!

 

[JohnK]

The sale and lease back is perfectly reasonable.

With the greatest respect and please do not take this personally.

Are you an accountant by any chance?

 

[simongr]

Yes by qualification (in the UK) - but not a pure accountant now thus my lack of detailed expertise on some of the more australian technical aspects of this transaction.

I thought that would have been obvious from a lot of my previous replies in this thread

 

[Tooner]

Dropping the 90% acceptance condition is official:


Qantas deal looks sealed

Interesting question comes to mind - do the proposed securities arrangements meet the Qantas Sale act requirements? Will FIRB approval be required (As the Banks involved are mostly O/S)?:?:

 

[Keith009]

Whatever people's feelings are about the sale - it's certainly very elegant manouvering by APA. The Machiavelli in me takes my cap off to them.

 

[codash1099]

Whatever people's feelings are about the sale - it's certainly very elegant manouvering by APA. The Machiavelli in me takes my cap off to them.

Yes indeed. The manouver will probably ensure a 90% takeup (the funds probably wouldn't want to retain shareholding in a company controlled by a single shareholder) and thus complete control.

 

[simongr]

Interesting question comes to mind - do the proposed securities arrangements meet the Qantas Sale act requirements? Will FIRB approval be required (As the Banks involved are mostly O/S)?:?:

Given that the banks wont own any shares I dont think that FIRB appproval will be required. Just because the bank has a mortgage on your property doesnt mean they can tel you what colour to paint the walls

 

[Takeshi]

Can Shareholders who have accepted to sell their shares to APA withdraw their offer ?

This APA really want Qantas bad and will pay anything to get it.

So if you withdraw your acceptance you may get a lot more than $5.45 a share then it could also fail and you get much less.

Its funny how APA paint this doom and gloom for Qantas and still want to buy it so much.

Its like hey you I want to buy your car. I know the engine's going I know the brakes might need replacing soon.
I know that there's a good chance of the gearbox failing but I still want to buy it from you at a premium price.......... very strange.
Maybe APA knows there is a hidden bag of a million dollars in the boot that the owner doesn't ????????

 

[Tooner]

Given that the banks wont own any shares I dont think that FIRB appproval will be required. Just because the bank has a mortgage on your property doesnt mean they can tel you what colour to paint the walls

I would agree except for the conditions which applied to the old Broadcasting Act (where it was definitiely an issue if a Bank held a mortgage on the business or licence), and the article's suggestion that the Bank's would "own" the shares.

I know Bob Mansfield said he didn't think FIRB approval would be required, but he said that with the original offer.

I personally don't think it's an issue, but there are plenty of people who might.

 

[oz_mark]

I would agree except for the conditions which applied to the old Broadcasting Act (where it was definitiely an issue if a Bank held a mortgage on the business or licence), and the article's suggestion that the Bank's would "own" the shares.

I know Bob Mansfield said he didn't think FIRB approval would be required, but he said that with the original offer.

I personally don't think it's an issue, but there are plenty of people who might.

Hmm, hasn't Costello been quoted as saying that it is good that it is foreign banks as if it goes belly up then Australian banks won't be exposed?

 

[serfty]

APA have acceptances of 31% of the shares from 50% of the original shareholders.

I wonder if this dropping of the 90 per cent condition enables those who have already accepted the deal to pull out with the view to rejoining at any improved offer that may occur in the future.

There must be a huge amount of money to be made here ...

This is why institutions such as UBS & Credit Suisse are wanting in on the action ...

 

[ric_melb]

Terry McCrann thinks that now the offer has been revised it is "mandatory" that some authority require APA to allow accepting shareholders to withdraw their shares. He also feels that APA will have to come back at a later stage and offer non accepting shareholders a higher price.

Be interesting to see. I believe this whole episode leaves a very sour taste in the mouth in regard to the way APA have played the game, and to the relative inaction of the Qantas board.

 

[mabunji]

From Sydney Morning Herald, April 14-15

'Debt burden could undo Qantas, say observers'

" .... Shareholders who accepted the bid before it was extended on March 23 can withdraw their acceptances. They have a month to do so. March 23 was the day Balanced Equity Management dealt APA a major blow when it announced it was not going to accept the $5.45 a share offer. But those who accepted after March 23 are locked in. This is because shareholders can only withdraw their acceptance in a negative or "adverse event". APA argues Thursday's extension was a "positive" event, given it boosted the chances of the deal succeeding ....."

 

[ozmerish]

Any thoughts as to how APA dropping to 70% will effect the bid?

If this falls through - any thoughts on the impact it might have on the board? My understanding is that they were going to split up 100m if it went through? Could this have been a factor in their agreement to support the bid? Would there be any changes if some members were more inclined to support than other members?

 

[QF WP]

Any thoughts as to how APA dropping to 70% will effect the bid? If this falls through - any thoughts on the impact it might have on the board?

My understanding is that they have agreed to having 2 independent Directors on the Board (essentially there to keep the up to 30% external shareholders happy)

My understanding is that they were going to split up 100m if it went through? Could this have been a factor in their agreement to support the bid? Would there be any changes if some members were more inclined to support than other members?

Off the top of my head, I thought it was $68M (the amount has been reported in this thread previously), although Geoff Dixon has said his will go to charity (well, he'll need the tax deduction). Yes, it would have been a factor so they would have had to advise their conflict of interest, so only the independant directors voted. They (9 of them) unanimously recommended we shareholders accept the bid {as did the Independent Expert}

 

[Takeshi]

So who owns Qantas now if this bid goes through .

What happened to the QSA where 51% of Qantas must be Aussie owned ???
This is getting really messy.

Who owns Qantas now the banks will own the shares and are mostly overseas banks right ??

UBS still has 10% or so.
Many other share holders are foriegners .
It would be interesting to see if the QSA has been breached.

And its getting so ever interesting.

Costello will have blood on his hands if Qantas ends up another Ansett and the Aussie public will pay.
It would have been so easy for him to say NO to APA in the national Interest.
This is our countries National Airline go play somewhere else.

This is all about greedy bankers making a killing out of fees and they could not careless if Qantas goes belly up.

 

[Myrna]

Off the top of my head, I thought it was $68M (the amount has been reported in this thread previously), although Geoff Dixon has said his will go to charity (well, he'll need the tax deduction). Yes, it would have been a factor so they would have had to advise their conflict of interest, so only the independant directors voted. They (9 of them) unanimously recommended we shareholders accept the bid {as did the Independent Expert}

There was an article on the front page of the Financial Review early this week (I think it might have been Monday 9th April 2007) which said that if the APA deal went through about 15 senior staff at Qantas (including GDixon) would get over $200M as bonus. Only the GDixon was named in the press and the amount he would get. I could not recall the exact total figure, it might have been $236M or something like that. I think this is outrageous because APA would be rewarding a few selected senior staff instead of the shareholders (who are the owners of Qantas). This might be the reason why some of the institutional funds managers were not happy with the price offered - and they were right.

Today on the SMH website in the business section there are 2 interesting articles on the consequences of the sale of Qantas - make very interesting reading. Bigger debt could undo Qantas, say observers - Business - Business - smh.com.au and Raiders' Qantas grab sparks call for review of bid - Business - Business.

 

[simongr]

I think this is outrageous because APA would be rewarding a few selected senior staff instead of the shareholders (who are the owners of Qantas). This might be the reason why some of the institutional funds managers were not happy with the price offered - and they were right.

Wasnt the share price of QF around $4.80 before tthe bid? So the original shareholders are receiving a premium on what they wee holding at of about 20%?

@Takeshi - QF is not the national airline. It is a cleverly branded australian base carrier that uses somme iconic images to reinforce the australianness.

 

[ric_melb]

Looking at my records it looks like the pre bid price was $4.45, so the current takeover price of $5.45, is a premium of some 20%.

However since November a number of events have occurred, that have absorbed this premium, and indicate that in today's market the bid price is too low.

Firstly the overall market is up by 15%. Secondly Qantas have announced a number of profit upgrades. Currently full year profit is expected to be up by 40%, and this could be revised upward again on recent passenger numbers.

So you could say the offer allows for these two factors; but then there is no takeover premium to persuade shareholders to accept.

If we assess a today value of Qantas at $5.45; with a takeover premium added the price should be in the order of $6.45.

You also need to allow for capital gains tax on any shares sold.
In my case this would reduce the net offer by at least 50 cents a share.

Despite the spin by APA, and the lack of action on behalf of shareholders by the Qantas board, the current offer price is looking very mean.