Here's an interesting article on the state of the take over and sme questions that should be answered.
Sell-off deal demands full disclosure
It's time for a public debate on the privatisation of our national airline, writes Glenda Korporaal
February 02, 2007
THE $11 billion private equity bid for Qantas will be a boon for Qantas shareholders and the highly paid investors and advisers on the deal. But as the group of high-powered, private equity players calling itself Airline Partners Australia prepares to release its formal statement to shareholders, and the clock ticks on the deal it hopes to wrap up in April, it's time for a broader public debate about the serious implications of the proposed privatisation of our national airline.
At the moment, the bidders maintain there is no legal reason for them to apply for approval under the Foreign Takeovers Act - and maybe that gives some indication as to how they may approach further deals with government if they succeed in taking Qantas private. Advised by highly paid lobbyists and advisers, they are co-operating behind the scenes, briefing ministers and government departments.
Their affable spokesman, Bob Mansfield, whose resume includes running food company McDonald's, phone company Optus and a short period as chief executive of the Fairfax media group, has been on an almost continuous loop in the media explaining that the consortium can think of nothing better than to back Qantas chief Geoff Dixon and his management team.
But we already have Dixon and his team running Qantas. So how does Mansfield and his private equity backers - the ubiquitous Macquarie Bank, Allco Finance, Allco Equity Partners, the San Francisco-based Texas Pacific Group and Canada's Onex - plan to make a profit by paying $11million for a company that was valued at only $6 billion on the stock market not too long ago? As the chairman of the $10billion Industry Funds Management, Garry Weaven (someone who has been a strong supporter of the positive potential for private equity in some circumstances in the past) has pointed out this week, there must be more to the deal and their plans for Qantas than we know.
One thing is clear. Once the deal is done, there will be no stopping Qantas's new private equity investors and the newly incentivised Qantas management team from putting their heads down and doing their darndest to make the most money out of the airline they can before getting it ready to sell off at an even higher price a few years down the track.
You only have to look at how Macquarie Airports has pushed up charges at Sydney airport and made a host of changes such as making it more difficult to drop off passengers (to force people to pay for parking).
If the Treasurer, other government ministers and federal politicians who go back to work in Canberra next week have any misgivings or need any formal assurances about what is going to happen to Qantas in a brave new world of privatisation, it's time to speak now or forever hold their peace. Politicians, central bankers and union leaders around the world are only just coming to grips with the rising tide of multi-billion dollar private equity deals sweeping the world.
In the US, a similar deal of national consequence would have already prompted a proactivist politician into calling public hearings on the matter, calling on the protagonists to give evidence on the public record.
With Qantas, all we have at the moment - apart from the carefully crafted public relations spiel - are private discussions being held behind closed doors.
There are some companies, such as Myer, which can be shaken up and revitalised under the attention of private equity ownership. But Qantas is no ordinary Australian company. Nor is it a bankrupt or badly run organisation desperately in need of a good shake-up and reorganisation. For those politicians still struggling tocome to terms with private equity, here is a starter list of 10 questions toask:
* 1. Hoes does APA plan to make a profit out of the deal?
* 2. How long does it plan to own Qantas?
* 3. What are its plans for Qantas employees?
* 4. What is the experience of major investor Texas Pacific in the airlines it has invested in?
* 5. What is the structure of the deal? Does it involve use of offshore tax havens? Qantas shareholders will have to pay capital gains tax on the profits they make from selling to APA. Will APA also pay capital gains tax on the profits they make on the sale of Qantas? Politicians should look closely at the present controversies in Korea where it has emerged that private equity firms - including Texas Pacific - have made big profits on buying and selling once-ailing Korean financial organisations.
* 6. How much money will the advisers make on the deal?
* 7. How much money do senior Qantas management stand to make out of the deal? Geoff Dixon has said he will give a possible $60million in compensation he could receive to charity. How much do other senior Qantas executives stand to make?
* 8. What are the potential conflicts between Macquarie Airports owning Sydney airport and having a key stake in Qantas? What safeguards will be in place to stop it working to ensure that Qantas gets the best deal at Sydney airport and its rivals get a raw deal? And what is to stop Qantas favouring Sydney airport over other airports for its services?
* 9. What will happen to the regional routes in Australia that Qantas presently serves?
* 10. What protections are there for Qantas frequent flyer holders?
It may be that the APA deal produces a leaner, slicker, more aggressive Qantas which thrives on doing its own thing, away from the annoying glare of the public spotlight and the scrutiny of being a publicly listed company.
But in the few weeks before the ideal becomes a reality, the Government and our politicians owe it to the Australian public to get some serious, binding, public assurances about what the consortium really plans for Qantas.
Interesting article ,don't you think.
Twiggs and others ,here is another invitation to post a constructive post..what do you think about the takeover and how it is being structured?