UBS Unit Ups Qantas Stake; Buyout in Doubt

A unit of Swiss investment bank UBS has increased its stake in Qantas Airways to 10.4%, giving it the power to block an $8.7 billion buyout of the Australian airline.

Qantas said in a filing to Australia's stock exchange on Monday that UBS Nominees had raised its stake in the airline from 8.9%, UBS Global Asset Management is the primary beneficial owner of the nominee stake, the filing said.

A buyout bid led by Macquarie Bank was already in doubt after another shareholder on Friday rejected the A$5.45 per share offer as too low. The bid needs 90% shareholder acceptance to succeed.

Qantas shares rose 0.6% on Monday, but are 6.6% below the bid price after falling sharply late last week.

Australian media has said in unsourced reports that UBS Nominees planned to reject the bid. UBS, whose investment banking arm is advising Qantas on the deal, has declined to comment.

Analysts said the fact that UBS had increased its stake would fuel confusion over whether it planned to block the bid or not. "It is believed UBS has been buying. It seems difficult to understand if they are not going to accept the offer," Fabian Babich, transport analyst at
brokerage BBY, said before the shareholding notice was released.

The Airline Partners Australia bid consortium was considering a range of alternatives on Monday. Analysts said it could either scrap the 90% acceptance condition, walk away completely or let its offer lapse and come back with a higher offer in four months.

The consortium is raising $8.4 billion in debt to fund the buyout. The 90% requirement is an important safeguard for debtholders.

The consortium also includes private equity firm Texas Pacific Group, Allco Equity Partners, Allco Finance Group and Canadian investment firm Onex.

There have been growing signs of shareholder resistance to private equity buyouts in Australia. Shareholders last month rejected a A$1.6 billion bid for travel retailer Flight Centre.