The $8.6 billion takeover bid for Qantas hit some turbulence Tuesday, with backers warning a legislative bid to protect Australian jobs could threaten the company's foreign operations and key institutional funds staying cool on the deal.
Qantas Airways Ltd.'s share price fell on Tuesday as speculation intensified that the offer by an investment group led by Australia's Macquarie Bank and the Texas Pacific Group of 5.45 Australian dollars a share plus a special dividend is not enough to seal the deal as an April 3 deadline nears.
Qantas shares fell 1.4 percent to close at 5.09 Australian dollars.
The carrier's management, who have recommended the offer to shareholders, has come under rising pressure to release forecasts for the company's prospects next financial year to convince some big fund managers that the bid does not undervalue the company.
The Australian Financial Review newspaper reported that UBS Global Asset Management and Balanced Equity Management - who have the combined power to scuttle the deal - have privately told chairwoman Margaret Jackson that Qantas should release a forecast for the year to June 30, 2008, to explain the board's decision to back the deal.
Andrew Sisson, managing direct of Balanced Equity Management, which holds about 4 percent of Qantas, on Tuesday said discussions were ongoing about the Qantas bid.
"We're assessing what we think the company's worth and whether it's good enough to accept, and we haven't concluded that process yet," Sisson told Dow Jones Newswires.
UBS, which holds about 7.1 percent of Qantas, has declined to comment.
Qantas has twice in recent months boosted its earnings forecast for the 12 months to June 30, 2007, but declined to make predictions beyond that.
The 11.1 billion Australian dollar, or $8.6 billion, bid by Airline Partners Australia, an investment group led by Macquarie Bank that also includes Canada's Onex Corp. and the Allco Finance Group, needs 90 percent of Qantas shares to compulsorily buy the rest, and to trigger the deal's debt package.
In a note to the Australian Securities Exchange on Tuesday, Qantas said APA had secured 15.25 percent of shares so far.
In Canberra, a Senate into proposed legislation that would include Qantas subsidiary Jetstar in rules ensuring that the company remains Australian owned and based heard from APA officials.
The bidding group said in a submission the legislation could force Qantas to sell its stake in New Zealand subsidiary Jetconnect Ltd., its minority holdings in Fiji's Air Pacific Ltd. and in Singapore-based Orangestar, the holding company for Jetstar Asia and Valuair.
Allco chairman David Coe said the bill's wording needed to be changed, but that it wasn't necessary anyway because existing legislation meant Jetstar could not continue overseas operations if it became majority foreign-owned.
Labor unions and some lawmakers fear Qantas jobs and services will be sent overseas if the takeover proceeds, and the pilots union says the consortium could transfer Qantas businesses to subsidiaries to lower costs.
Qantas and the bidders say they have no such plans.
Treasurer Peter Costello announced last week the government would not block the deal, saying it had received binding guarantees that Qantas would stay Australian-owned and keep its maintenance operations in Australia.
A poll published in Faifax Media newspapers Tuesday found 56 percent of 1,400 respondents nationwide disapproved of the government's decision, adding to the deal's political sensitivity just months from a federal election. Many Australians consider Qantas an icon that should be publicly owned.
Also Tuesday, Qantas strongly rejected a union leader's claim to the inquiry that low-security inmates from a Singapore prison were part of maintenance crews that work on Qantas planes in the city-state.
"No prisoner in Singapore has access to any Qantas aircraft undergoing heavy maintenance," a company spokesman said.
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