APA Qantas Bid Strategy
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APA acceptances for buyout drop for second time.
APA have notified the ASX of a drop in acceptances for its buyout bid for the second time since it dropped its acceptance level to 70%.
Refer to APA's 'Update on Relevant Interests and Institutional Acceptance Facility (IAF)' statement, sent to ASX on 20 April 07.
Previous total interest 28.86%
Current total interest 27.48%, a 1.38% drop.
Credit Suisse also notified the ASX of an increase in its holdings of QAN on 20 April:
Previous voting power 7.20%, Current voting power 8.54%, up 1.34%
It looks like credit suisse picked up a 1.34% when the IAF went down 1.38%. Is credit suisse one of the mobs bankrolling the takeover? If so, it looks like they are buying up stock as other institutions get out on the open market, to help push the deal through.
Any other thoughts?
Refer to APA's 'Update on Relevant Interests and Institutional Acceptance Facility (IAF)' statement, sent to ASX on 20 April 07.
Previous total interest 28.86%
Current total interest 27.48%, a 1.38% drop.
Credit Suisse also notified the ASX of an increase in its holdings of QAN on 20 April:
Previous voting power 7.20%, Current voting power 8.54%, up 1.34%
It looks like credit suisse picked up a 1.34% when the IAF went down 1.38%. Is credit suisse one of the mobs bankrolling the takeover? If so, it looks like they are buying up stock as other institutions get out on the open market, to help push the deal through.
Any other thoughts?
Qantas Substantial Shareholders List
Qantas Substantial Shareholders List
Date of Change Shareholder Name Shareholding % Shares Held
22/08/2006 UBS Nominees Ltd 209,165,998 10.85
16/04/2007 UBS Asset Management 226,221,751 11.40
18/04/2007 Credit Suisse First Boston 189,526,089 8.54
30/03/2007 Deutsche Bank AG 211,623,753 10.66
20/03/2007 APA Limited 226,018,981 11.39
Cut and paste from an online broker, data could be a few days old.
Date of Change Shareholder Name Shareholding % Shares Held
22/08/2006 UBS Nominees Ltd 209,165,998 10.85
16/04/2007 UBS Asset Management 226,221,751 11.40
18/04/2007 Credit Suisse First Boston 189,526,089 8.54
30/03/2007 Deutsche Bank AG 211,623,753 10.66
20/03/2007 APA Limited 226,018,981 11.39
Cut and paste from an online broker, data could be a few days old.
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Fantasyland,
It doesn't look like CS are high up in the debt syndicate, although they could well be lower down in the pecking order.
It's in section 5.3 of the Bidder's Statement, go down to page 47.
It doesn't look like CS are high up in the debt syndicate, although they could well be lower down in the pecking order.
It's in section 5.3 of the Bidder's Statement, go down to page 47.
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I can no longer post my suspicions about the APA bid, except to say I do not believe it is in the best interests of current shareholders based on nothing more than intuition. I believe there are hollow logs stuffed with cash all over Qantas, just waiting to be discovered by the new owners.
The Board are restrained by requirements of corporate governance to be prudential. The private Qantas will have no such constraint - and they are relying on the Australian Government to act as a safety net and virtually guarantee there profitability through keeping out competitors.
Looks to me that we will see sharply increased airline ticket prices and a further decrease in service levels if this deal goes through.
Furthermore, once they have gutted the airline and resold it back to the mug punters on the sharemarket, its returns will be unspectacular because of the need for its Board to apply prudential standards and build up reserves - the very reserves that are going to be stripped out shortly.
However, I guess approving the deal is Costellos ticket to eventual leadership of the Liberal Party. You know, it's a Sydney thing.
The Board are restrained by requirements of corporate governance to be prudential. The private Qantas will have no such constraint - and they are relying on the Australian Government to act as a safety net and virtually guarantee there profitability through keeping out competitors.
Looks to me that we will see sharply increased airline ticket prices and a further decrease in service levels if this deal goes through.
Furthermore, once they have gutted the airline and resold it back to the mug punters on the sharemarket, its returns will be unspectacular because of the need for its Board to apply prudential standards and build up reserves - the very reserves that are going to be stripped out shortly.
However, I guess approving the deal is Costellos ticket to eventual leadership of the Liberal Party. You know, it's a Sydney thing.
APA is still worried!
I had a phone call from the APA call centre last night which would indicate that they are still desperate to get every share possible. It may not be a slam dunk to get even 70%.
I've been writing to the PM, Treasurer, Minister for Transport and my local member during the last week because the latest information indicates that this whole deal was a setup. Qantas wasn't approached by APA - I believe that Dixon had a hand in organising it.
I've been writing to the PM, Treasurer, Minister for Transport and my local member during the last week because the latest information indicates that this whole deal was a setup. Qantas wasn't approached by APA - I believe that Dixon had a hand in organising it.
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YesTam
I have read your post and you make very good sense,had a shot at you on the other interests (BH) you posted but thanks for the post on this as it is very well put.
I have read your post and you make very good sense,had a shot at you on the other interests (BH) you posted but thanks for the post on this as it is very well put.
Although I am not yet convinced the APA bid is bad for anyone except of course mainline employees, the silence from QF management is positively deafening which in itself speaks volumes.
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Granted, I'm not 100% sure of securities law in Australia (especially with respect to advising on securities) but I am rather concerned every time I see a quote from Mansfield or any of his APA fellow-travellers along the lines of "if this bid fails, the Qantas share price is almost certain to fall".
Are the qualified (as financial advisors) to give such 'advice'?
It seems pretty logical that the share price would fall as APA (and its members) might possibly seek to offload their holdings; however if what the chap from Balanced said is right, then there might soon be buyers popping out of the woodwork. If what Mr Sissons said is correct, then that would suggest that the APA bid is actually artificially dampening the Qantas share price.
The above is not to be construed as advice of any sort; it is merely a personal opinion made on the basis of no formal research into the company concerned.
Are the qualified (as financial advisors) to give such 'advice'?
It seems pretty logical that the share price would fall as APA (and its members) might possibly seek to offload their holdings; however if what the chap from Balanced said is right, then there might soon be buyers popping out of the woodwork. If what Mr Sissons said is correct, then that would suggest that the APA bid is actually artificially dampening the Qantas share price.
The above is not to be construed as advice of any sort; it is merely a personal opinion made on the basis of no formal research into the company concerned.
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Going Boeing!!!!! You said you believed Dixon approached APA??????????
Can you substantiate that???????????
Should such an allegation be correct, it would suggest that I am correct in believing that Qantas has been crying poor while all the time it's been making hay and stuffing it in hollow logs, but has now reached the point that such a strategy is no longer legally possible, all hollow logs such as depreciation charges, prepaid expenses, refundable aircraft deposits and suchlike being stuffed to bursting.
It would seem that some fund managers share my belief that the APA bid is not a fantastic once-in-a-lifetime offer for a broken down, worthless, "legacy" airline on its last legs that should eagerly be snapped up by keen shareholders.
To put it another way, its not a worthless beaten up Holden stuck under all the mud and hay Dixon has camouflaged it with, its a Rolls Royce of a cash generator and its trunk is stuffed full of hundred dollar bills!
Can you substantiate that???????????
Should such an allegation be correct, it would suggest that I am correct in believing that Qantas has been crying poor while all the time it's been making hay and stuffing it in hollow logs, but has now reached the point that such a strategy is no longer legally possible, all hollow logs such as depreciation charges, prepaid expenses, refundable aircraft deposits and suchlike being stuffed to bursting.
It would seem that some fund managers share my belief that the APA bid is not a fantastic once-in-a-lifetime offer for a broken down, worthless, "legacy" airline on its last legs that should eagerly be snapped up by keen shareholders.
To put it another way, its not a worthless beaten up Holden stuck under all the mud and hay Dixon has camouflaged it with, its a Rolls Royce of a cash generator and its trunk is stuffed full of hundred dollar bills!
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Qantas shareholders out in cold
Page 2 of 2
Whichever way you look at it, the shareholders are passengers on a one-way trip to nowhere.
"THE company at law is a different person altogether from its subscribers." (Lord Macnaughton, House of Lords, 1897)
"Shareholders are not in the eyes of the law part owners of the undertaking. The undertaking is something different from the totality of the shareholdings." (Lord Justice Evershed, House of Lords, 1948)
So who owns Qantas? The question is not as silly as it seems. When I say I own my house, everybody understands that I can use it for my own enjoyment and dispose of it as I wish, subject to the relevant planning laws. But when somebody buys shares in Qantas, the shareholder has none of these rights, apart from the right to sell the shares.
Qantas shareholders (apart from its directors and senior executives who also have shareholdings) have nothing to do with the running of the business. So rather than asserting the shareholders own Qantas, it is more accurate to say that the Qantas shareholders own their shares in Qantas.
So who owns the company? This question is less important than, who is responsible for the management of the company and in whose interests? Only the directors are responsible for the company as an ongoing entity in itself as distinct from its employees, its shareholders, its creditors and its customers, who have interests in aspects of the business.
The idea that the directors of a public company are responsible only to its shareholders is a recent idea, largely promoted by neo-liberals such as Milton Friedman, and it has gained popularity with the rise in the threat of hostile takeovers. The interests of shareholders may be synonymous with the interests of the company, but not always.
Even if APA succeeded in making Qantas a private company, APA's structure ensures the liability of the owners will be limited to the money put into the business by APA. And based on the information available thus far, that will only be about 25 per cent of the liabilities that will be created as part of the takeover package.
But if directors operated according to the idea that their responsibility is to shareholders rather than the company itself, how do they resolve conflicting shareholder interests? These include those who would prefer for tax reasons a share buyback against those who prefer dividends, or foreign shareholders who are not subject to capital gains tax against local shareholders who are, or those who want immediate capital gains because they want to exit the company against those who are interested in a long-term stream of earnings.
Apart from limited liability, the main advantage of listing on the stock exchange is the listing provides liquidity and a vehicle for speculation against an asset or collection of assets that are fundamentally illiquid. Even so, some businesses in energy, telecommunications and transport (including Qantas) that have been privatised in the past decade are still seen as providing a public service.
There are two models of corporate responsibility, according to British economists John Kay and Aubrey Silberston, who wrote a seminal study of corporate governance in the mid 1990s. These are the Anglo-Saxon agency model adopted by Britain, North America and Australia, where the company interest is served as a by-product of maximising shareholder value, and the trusteeship model common to Western Europe and Japan, where directors are expected to weigh the balance of the conflicting interests of current shareholders with the interests of present and future shareholders, employees, customers and the public.
The trusteeship model, which is still embedded in the law and practised increasingly in the breach, fits best with the prime responsibility of management to enhance the long-term development of the capabilities of the business.
The agency model, which the initial bid by the APA partners pretended to address, stands in direct conflict with the role of the sharemarket, which is to divorce the time horizon of investors from the time horizons of the companies in which they invest.
What would be the response of shareholders if Qantas unions proposed a deal in which they got $400-500 million from the company in fees and an up-front payment of $4 billion financed by debt in return for a cut in wages offset by a profit-sharing deal? Union claims are weighed in the balance against the interests of the public and company interest. Why not shareholder claims?The point is, faced with a Treasurer who is incapable of acting in the public interest, unless directors weigh the interests of shareholders against the interests of the company, who is there to do the job?
The public and shareholders who look at their Qantas shares as an annuity rather than a vehicle for speculation have been badly let down by chairman Margaret Jackson and chief executive Geoff Dixon, by whichever criteria of directors responsibility is used.Either the two of them were remiss in not returning $4 billion in funds to shareholders before APA made its bid or they failed in their fiduciary duty by not recommending against the takeover proposal when they knew that it involved APA ripping $4 billion out of the company. Let's be blunt. Either the directors have been guilty of running a lazy balance sheet or they have not. If not, they are recommending a bid that endangers the long-term viability of the company. Worse, they expect to profit personally if the APA bid succeeds.
kdavidson @theage.com.au
It says it ALL. Dicko & Jackson are an absolute disgrace
Whichever way you look at it, the shareholders are passengers on a one-way trip to nowhere.
"THE company at law is a different person altogether from its subscribers." (Lord Macnaughton, House of Lords, 1897)
"Shareholders are not in the eyes of the law part owners of the undertaking. The undertaking is something different from the totality of the shareholdings." (Lord Justice Evershed, House of Lords, 1948)
So who owns Qantas? The question is not as silly as it seems. When I say I own my house, everybody understands that I can use it for my own enjoyment and dispose of it as I wish, subject to the relevant planning laws. But when somebody buys shares in Qantas, the shareholder has none of these rights, apart from the right to sell the shares.
Qantas shareholders (apart from its directors and senior executives who also have shareholdings) have nothing to do with the running of the business. So rather than asserting the shareholders own Qantas, it is more accurate to say that the Qantas shareholders own their shares in Qantas.
So who owns the company? This question is less important than, who is responsible for the management of the company and in whose interests? Only the directors are responsible for the company as an ongoing entity in itself as distinct from its employees, its shareholders, its creditors and its customers, who have interests in aspects of the business.
The idea that the directors of a public company are responsible only to its shareholders is a recent idea, largely promoted by neo-liberals such as Milton Friedman, and it has gained popularity with the rise in the threat of hostile takeovers. The interests of shareholders may be synonymous with the interests of the company, but not always.
Even if APA succeeded in making Qantas a private company, APA's structure ensures the liability of the owners will be limited to the money put into the business by APA. And based on the information available thus far, that will only be about 25 per cent of the liabilities that will be created as part of the takeover package.
But if directors operated according to the idea that their responsibility is to shareholders rather than the company itself, how do they resolve conflicting shareholder interests? These include those who would prefer for tax reasons a share buyback against those who prefer dividends, or foreign shareholders who are not subject to capital gains tax against local shareholders who are, or those who want immediate capital gains because they want to exit the company against those who are interested in a long-term stream of earnings.
Apart from limited liability, the main advantage of listing on the stock exchange is the listing provides liquidity and a vehicle for speculation against an asset or collection of assets that are fundamentally illiquid. Even so, some businesses in energy, telecommunications and transport (including Qantas) that have been privatised in the past decade are still seen as providing a public service.
There are two models of corporate responsibility, according to British economists John Kay and Aubrey Silberston, who wrote a seminal study of corporate governance in the mid 1990s. These are the Anglo-Saxon agency model adopted by Britain, North America and Australia, where the company interest is served as a by-product of maximising shareholder value, and the trusteeship model common to Western Europe and Japan, where directors are expected to weigh the balance of the conflicting interests of current shareholders with the interests of present and future shareholders, employees, customers and the public.
The trusteeship model, which is still embedded in the law and practised increasingly in the breach, fits best with the prime responsibility of management to enhance the long-term development of the capabilities of the business.
The agency model, which the initial bid by the APA partners pretended to address, stands in direct conflict with the role of the sharemarket, which is to divorce the time horizon of investors from the time horizons of the companies in which they invest.
What would be the response of shareholders if Qantas unions proposed a deal in which they got $400-500 million from the company in fees and an up-front payment of $4 billion financed by debt in return for a cut in wages offset by a profit-sharing deal? Union claims are weighed in the balance against the interests of the public and company interest. Why not shareholder claims?The point is, faced with a Treasurer who is incapable of acting in the public interest, unless directors weigh the interests of shareholders against the interests of the company, who is there to do the job?
The public and shareholders who look at their Qantas shares as an annuity rather than a vehicle for speculation have been badly let down by chairman Margaret Jackson and chief executive Geoff Dixon, by whichever criteria of directors responsibility is used.Either the two of them were remiss in not returning $4 billion in funds to shareholders before APA made its bid or they failed in their fiduciary duty by not recommending against the takeover proposal when they knew that it involved APA ripping $4 billion out of the company. Let's be blunt. Either the directors have been guilty of running a lazy balance sheet or they have not. If not, they are recommending a bid that endangers the long-term viability of the company. Worse, they expect to profit personally if the APA bid succeeds.
kdavidson @theage.com.au
It says it ALL. Dicko & Jackson are an absolute disgrace
Can you substantiate that???????????
YesTAM
No I can't - as I said it is my belief. Dixon has for a number of years been talking down the share price as well as stating publicly that the cost of borrowing money would be cheaper (access to patient capital) if Qantas was a private company that didn't have to meet all the reporting requirements to the ASX and shareholders. Even if he didn't directly have a hand in the organising of it, he certainly set up ideal conditions for an equity buyout which then gives him the access to capital that he wants. Shame about the massive debt that would be created.
No I can't - as I said it is my belief. Dixon has for a number of years been talking down the share price as well as stating publicly that the cost of borrowing money would be cheaper (access to patient capital) if Qantas was a private company that didn't have to meet all the reporting requirements to the ASX and shareholders. Even if he didn't directly have a hand in the organising of it, he certainly set up ideal conditions for an equity buyout which then gives him the access to capital that he wants. Shame about the massive debt that would be created.
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Dixon was asked that very question at a media briefing.
He was asked whether they approached APA or APA approached Qantas. He looked at Mansfield and they both answered no comment.
Why?
Furthermore as alluded to above the fiduciary duty of a director is to act in the interests of the business owner.
Funnily enough APA mention they are going to rip $4 billion from Qantas in the first year. Which given Dixon's continued insistence to relaxing the Sale act and allowing more foriegn capital (as we struggle at present-according to him) I find highly suspicious that him or any other director has made NO mention of the fact that the 'Capital required to finance new purchases' blah blah will be made even harder to source when losing $4 billion to the consortium.
He was asked whether they approached APA or APA approached Qantas. He looked at Mansfield and they both answered no comment.
Why?
Furthermore as alluded to above the fiduciary duty of a director is to act in the interests of the business owner.
Funnily enough APA mention they are going to rip $4 billion from Qantas in the first year. Which given Dixon's continued insistence to relaxing the Sale act and allowing more foriegn capital (as we struggle at present-according to him) I find highly suspicious that him or any other director has made NO mention of the fact that the 'Capital required to finance new purchases' blah blah will be made even harder to source when losing $4 billion to the consortium.
