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Qantas hires Macquarie to fight off suitors

by Andrew Bulkeley | Published June 12, 2012 at 1:15 PM

Following a warning of its first loss and a resulting plunge in stock price to its lowest level since the airline went public nearly 17 years ago, Australia's Qantas Airways Ltd. on Tuesday, June 12, hired Macquarie Group Ltd. to fight off potential offers.

Qantas said it would also form an internal committee to ward off potential suitors. Australian law would prevent any foreign investor from gaining control of the company.

After hitting their lowest price since the company's August 1995 initial public offering, Qantas shares jumped 10.8%, or A$0.1050, to close Tuesday at A$1.075, valuing the airline at A$2.43 billion ($1.92 billion).

The company likely attracted the attention of would-be bidders after its stock descended. The company disappointed investors by forecasting a A$450 million loss on its international routes, which account for about 35% of its business, as still-high oil prices and stiff competition forced its profits to stall.

The move comes just as competitors appear to be interested in some kind of tie-up with the airline. Tim Clark, president of Dubai's Emirates Airlines, said in a Bloomberg Television interview during an airline industry event in Beijing that he would be interested in a commercial link with Qantas to expand on its successful Australian business. He reportedly denied an interest in an equity stake.

A link between International Consolidated Airlines Group SA -- parent of British Airways plc and Spain's Iberia Líneas Aéreas de España SA -- and Qantas would also make sense, IAG chief executive Willie Walsh said at the same industry conference. The two airlines already cooperate on routes between Europe and the U.S., but the executive went on to say that he was no longer interested in mergers and would prefer instead to see consolidation through attrition.

"I think, from an overall industry point of view, the time has come for a proper cleanout. You can say that's very cold and heartless, but we're in business and the reality is that the weak fail," Walsh said.

Walsh several years ago tried to merge his airline with Qantas in a deal valued at about $6.5 billion, but the two companies couldn't agree on a valuation. Walsh was also expected to take a run at the privatization of Portuguese carrier TAP SGPS SA later this year. Portugal is being forced to sell the carrier as part of a €78 billion ($99.3 billion) bailout from the European Union and the International Monetary Fund.

Observers have also speculated that a consortium led by former Qantas CEO Geoff Dixon and including businessman John Singleton is considering making a bid.

Singleton on Tuesday told the Sydney Morning Herald that Qantas is undervalued and that he is "always interested" in potential deals, but declined further comment.

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Tags: Australia | Macquarie Group Ltd. | Qantas Airways Ltd. | restructuring

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Qantas hires Macquarie to fight off suitors

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