number_6

And now QF management has disclosed an expected 30% rise in full-year profit for 2007 (over the record level of 2006). Which makes the takeover bid seriously under-priced. Looks like QF management is keen to fight this tooth and nail, which suggests it is a pretty serious threat.

nonce

number_6 Do you think the profit forecast has more to do with JQi being more successful than originally expected and it is just a timing issue?

JQi only started flying this week so QF wouldn't have really been able to judge the reception and how much tweaking the concept required into full product. The way I read the profit upgrade is two fold. 1 - the reduction in fuel costs is going to help and 2 - we think we are on a winning format with JQi.

Add that to what seems to be a very bouyant domestic market at the moment, based on how packed the QF clubs are and a lack of red e-fare sales and times must be pretty good for QF.

The other item we do not know about are the internal numbers around cost savings. When QF moved to cost centre accounting a few years ago and with Geoff stating 12mths ago that every individual Business Unit needed to stand on its own two feet I dare say the benefits of this may have only recently kicked in.

Considering every CEO's job is to drive shareholder value then of course this is the time to be telling good news to the market.

I must admit the idea of a private equity buyout scares me. I see this as a corporate raid on QF assets that will strip the airline of all the good stuff (like a new fleet of A330, A380, 787, A320 and 738) and lease them back to the group for significantly more than their value. This type of raiding will leave the QF group starved of capital to invest, full of debt and unable to compete. While the investors will make a quick buck as Australian's we will be left with another AN on our hands and a classic case of when good companies go bad.

If this deal goes ahead I will feel for the QF employees (including the senior management team) that have poored their blood sweat and tears into making a bunch of private equity partners rich while gutting a national icon.

Kiwi Flyer

I would guess that JQi is trivial in the short term profit outlook, compared to the impact of lower fuel prices.

bensyd

I dont know about that Dixon seems pretty happy. The fact they had had discussions before the announcement would lead me to believe management is keen on the deal.

Great point. And no doubt ageing the fleet is something MBL have in mind. However we shouldn't think entirely negatively of them and it is possible that they are looking at QF as a way into the transport industry. Perhaps they will use TP to assist them in trimming down QF selling parts of the business then sell QF into a new fund "Macquarie Transport", which will look to buy other transport assets, and which of course MBL will make big fat management profits.

number_6

Which is why Dixon made the press release a few days ago that he has nothing to do with the takeover groups and haven't had any talks about renumeration or after-takeover management. I suppose we'll see in the end (and the end is in sight, from what I hear today).

bensyd

But there has been no comment from QF as to whether they think it a good idea or not. If they were against the buyout then they would be making sure the public knew the record of private equity firms buying and stripping companies. I'm pretty sure that QF was consulted beforehand and infact they have intimated that they were, Packer is a top 20 shareholder in MBL and sits on the QF board.

abcedaria

Posturing is obviously being done by both sides. By realising that profits are expected to be above targets, QF could be readying for a requested increase in offer price. Take overs rarely, if ever, go for first offer. And this gives the perfect reason to increase the asking price. All in all, this really has been a friendly saga so far.

drron

With return on capital between 6-8% over the last 6 years and ROE 9-11% over last 6 years plus on last balance sheet current assets of 5B and current liabilities of 5.4B along with long term debt of 5.7B I would say $5 is an excellent share price which can only go south if the bid disappears.
Management might be fighting this with one tooth and nail but the rest of their teeth and nails realise that they are reported to being offered 1% of the equity.
The forecast rise in profit would have a lot to do with the oil price drop and QF's policy of fuel fines.This could just as quickly be reversed.

Moomba

An announcement expected this week according to this article.

http://news.airwise.com/story/view/1165923349.html

bravoecho

MELBOURNE, Dec 13 (Reuters) - Australia's Qantas Airways Ltd.
<QAN.AX> has rejected a conditional A$10.9 billion ($8.6 billion) buyout offer led by Macquarie Bank Ltd. <MBL.AX> and Texas Pacific Group [TPG.UL].
The offer of A$5.50 a share was 5 percent above Qantas's last trade.
"The proposed offer price is A$5.50 per share and incorporates a number of complex conditions, the requirement for unanimous support by Qantas directors and a break fee," Qantas said in a statement.
"The non-executive directors consider that the terms of the proposal are not acceptable."
Qantas said it would keep shareholders informed of any further developments.
The bidding team includes Allco Equity Partners, Allco Finance Group <AFG.AX>, Macquarie, Canadian investment firm Onex Corp. <OCX.TO> and private equity firm Texas Pacific Group [TPG.UL].
The offer price is 26 percent higher than Qantas's share price before the airline said on Nov. 22 that it had been approached with a buyout offer.
It values Qantas at 15.6 times forecast earnings for 2007, compared with regional rivals Singapore Airlines Ltd. <SIAL.SI> at 12.6 and Cathay Pacific Airways <0293.HK> at 17.8, according to Reuters data.
A Qantas spokesman had no immediate comment and spokesmen for
the bidding consortium were not immediately available.

(END) Dow Jones Newswires
December 12, 2006 18:09 ET (23:09 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.

sailrob81

ABC in Melbourne has just reported that QF has rejected the offer.

http://www.bloomberg.com/apps/news?p...zTA&refer=asia

bensyd

Macquarie will not take more than 15% to appease conflict of interest concerns over its ownership of Sydney Airport. What a fantastic bit of self regulation

hobarthoney

http://news.ninemsn.com.au/article.aspx?id=90539

Qantas say no!

Traveloguy

Very happy but I'm sure we will see a higher offer on the table shortly depending on high high they PE group are prepared to go.

sinanju

Qantas says yes?