Take-over talk swirls around Qantas

(Sydney: 22 November 2006) The pursuit of Qantas by a consortium involving Texas Pacific Group and Macquarie Bank has the potential to test the Australian Government’s aviation regulatory strategy, according to the Centre for Asia Pacific Aviation. There is the prospect of an acquisitive and cashed up US private equity investor buying into an icon company which is highly politically sensitive and subject to a 49% limit on foreign shareholdings.

At this stage, the nature of Macquarie’s role is as unclear as the ambitions of Texas Pacific. However, one thing is certain and that is Texas Pacific is a powerful and experienced stalker of companies, with private equity funds of up to USD20 billion and previous investments in Continental Airlines and America West, among others.

Qantas is a plum target - a financially robust carrier with a strong track record and access to the world’s fastest growing markets in the Asia Pacific.

It is also an awkward buy-out proposition, with a broad spread of institutional shareholders and “mums and dads” investors. However, there may be an upside for Qantas with Texas Pacific offering a possible vehicle for the airline to access fresh pools of foreign capital to fund its future aircraft acquisition and development programmes.

Opponents to any potential deal will probably raise the issue of the overlap between Macquarie Bank and Macquarie Airports' majority ownership of Sydney Airport, but the entities are distinctly separate.

According to the Centre, if a concrete bid does materialise, Qantas could benefit from a strong, extremely well funded backer in Texas Pacific, which has been scouting the Asia Pacific region for several years for a long term investment, since its planned involvement in the failed Tesna bid to revive Ansett. Qantas' positioning with two strong brands for the business and leisure segments, its solid financial profile and strategic positioning make it an attractive target.