Bloomberg News

Qantas Hires Macquaire for Takeover Defense After Slump

June 12, 2012

Qantas Airways CEO Alan Joyce

Alan Joyce, chief executive officer of Qantas Airways Ltd. Photographer: Nelson Ching/Bloomberg

Qantas Airways Ltd. (QAN), which lost A$1 billion ($1 billion) in market value last week, appointed Macquarie Group Ltd. (MQG) and set up an internal team to ward off potential bids for Australia’s largest carrier.

Shares of the carrier jumped 11 percent, the biggest gain in more than five years, to A$1.075 at close of trading in Sydney. Macquarie was hired to advise on a defense against any bids by buyout firms, Thomas Woodward, a Qantas spokesman, said by e-mail.

Qantas may be more attractive to bidders after its stock slumped to its lowest levels on record last week after forecasting the first annual net loss since a 1995 initial public offering. The airline, which can only legally be controlled by Australian investors, is battling rising losses on international services as rivals from the Middle East and Asia lure passengers.

“There have to be people looking at potential strategic stakes or a takeover,” said Sondal Bensan, an analyst at BT Investment Management Ltd. “Whether they have serious intentions is a hard call. It’s a difficult business to run and we’re in an uncertain environment.”

BT is controlled by Westpac Banking Corp. (WBC), Qantas’s seventh-largest shareholder with a 5.1 percent stake, according to data compiled by Bloomberg.

Qantas has been the subject of takeover attempts in the past. Macquarie was a member of a group led by TPG Capital that agreed to buy Qantas in 2006 for A$5.45 in cash per share. The bid failed after shareholders rejected the offer.

Qantas didn’t give any reason for announcing the defense move, which was first reported in the Australian Financial Review newspaper today.

Strategic Stake

The Australian newspaper Nov. 26 quoted former Qantas Chief Executive Officer Geoff Dixon saying he had a “serious look” at buying a strategic stake in the carrier last year.

Consolidation of carriers “is a good thing for the industry”, Chief Executive Officer Alan Joyce said at an industry conference in Beijing today. “The industry is more fragmented around the world.”

Qantas’s debt and equity is currently valued at A$5.8 billion, according to data compiled by Bloomberg. That’s about 2.6 times the A$2.3 billion in earnings before interest, tax, depreciation and amortization the company recorded last year.

In 14 takeovers of airlines worth at least $500 million since 1999, the median multiple has been 6.7 times Ebitda, with a range of 2.7 to 71, according to data compiled by Bloomberg.

Qantas expects losses on international routes to more than double in the year ending June to A$450 million as it struggles with higher fuel costs and competition. Its domestic division, with a market share of about 65 percent, will earn A$600 million before interest and tax.

Cutting Routes

Joyce has already cut unprofitable routes, shed staff and delayed new aircraft in a bid to turn the operations around.

Emirates Airline, the world’s largest carrier by international passenger traffic, said yesterday that it was examining a “commercial arrangement” with Qantas while stopping short of taking an equity stake in the company.

“The Australian market has been one that is hugely successful for Emirates,” the company’s president Tim Clark said in an interview with Bloomberg Television in Beijing.

Emirates could take a stake of as much as 30 percent in a Qantas domestic unit if the international operations were separated, Sydney-based Deutsche Bank analyst Cameron McDonald wrote in a May 24 note.

A tie-up of some sort between the two airlines makes sense, International Consolidated Airlines Group SA Chief Executive Officer Willie Walsh said in Beijing today. IAG’s British Airways unit is a long-standing partner for Qantas on flights between Australia and Europe.

Lisa Jamieson, a spokeswoman for Macquarie, declined to comment.

To contact the reporter on this story: David Fickling in Sydney at

To contact the editor responsible for this story: Neil Denslow at

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