News: Tesna to press on with Ansett bid

Old Feb 24, 02, 5:17 pm
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News: Tesna to press on with Ansett bid

Tesna to press on with Ansett bid
Leonie Wood
February 25 2002

Ansett's prospective owner, the Tesna consortium, has vowed to press on with its bid for the failed airline despite the collapse late last week of merger talks with budget airline carrier Virgin Blue.

Tesna sources said last night that Melbourne businessmen Lindsay Fox and Solomon Lew and their US-based equity partners, Bill Franke and David Bonderman, remained committed to buying Ansett even though many financial analysts believe the domestic aviation industry is now primed for a price war "bloodbath".

Tesna must complete its Ansett bid by midnight on Thursday to prevent the administrators, Mark Mentha and Mark Korda of accounting firm Andersen, shutting down the airline's operations and selling its assets. About 3000 jobs hang in the balance.

Teams of lawyers and consultants for Tesna and the administrators worked through the weekend to finalise agreements and documentation governing aircraft leases, domestic terminal leases and asset titles.

Sources said Tesna's deal was "on track", but the sale documentation is unlikely to be ready before the administrators appear before Justice Susan Kenny in the Federal Court this afternoon.

However, it is now likely that Ansett's administrators will scrap plans to seek the court's approval for the sale.

As Tesna scrambles to meet the deadline, sources yesterday said both Tesna and the administrators wanted to devote their resources to getting the deal settled before Thursday.

The Australian Securities and Investments Commission last week indicated it would oppose the administrators' application, arguing the decision to sell Ansett's intercapital operations was a commercial one for the administrators, and therefore did not require the court's sanction.

As Tesna's bid draws to a close, industry analysts believe either Ansett or Virgin Blue will succumb to a price war, forcing the rival airlines to reopen merger talks later in the year.

Over the past two weeks Tesna and Virgin Blue have discussed merging their businesses to head off competition from industry behemoth Qantas.

Tesna wanted to take over Virgin Blue and retain both the Ansett and Virgin Blue brands, but Virgin Group refused to cede control. Tesna and Virgin Blue also disagreed over how the brands should be managed.

Speaking on Nine Network's Business Sunday program yesterday, Virgin Blue's chief executive Brett Godfrey said the Tesna merger was potentially worth more than the $250 million offered last year by Ansett's former parent, Air New Zealand.

He conceded that both airlines "had fairly high opinions of themselves, but at the end of the day we weren't prepared to cede control".

"We just didn't quite see this thing working," he said. "We didn't share the vision."

Mr Godfrey suggested Tesna's merger plans involved Ansett contributing 1500 workers and Virgin Blue 1300. Virgin Blue's earnings would have subsidised Ansett's losses.

Still, Mr Godfrey said Virgin Blue and Tesna gleaned "interesting information out of each other, and I think that's going to help both airlines".

Echoing comments by Qantas chief executive Geoff Dixon - who has predicted a "bloodbath" in which only two airlines will survive - Mr Godfrey said he did not expect a return to $33 one-way fares, a memorable part of the four-way duel that ended in the death of Impulse.

He agreed, however, that aggressive fare-setting would still be prevalent.

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