The private equity group bidding A$10.82 billion (US$8.92 billion) for Australia's Qantas airline has restructured its offer to ensure its success, lowering the threshold of shares it needs to 70% from 90%.
The announcement was widely expected after stakeholders who held enough stock to block Airline Partners Australia's initial bid indicated they would not support the takeover, and after others started buying up strategic stakes that also could affect the deal.
The consortium, led by Australia's Macquarie Bank and the Texas Pacific Group, said in a statement that after talking to its financiers it had decided to lower its minimum shareholder acceptance condition.
It also extended the closing date of the A$5.45-per-share offer, which is backed by Qantas' board, by two weeks to May 4. Qantas shares rose on the news Thursday, which came shortly before the market closed, finishing at a record high A$5.39.
Consortium spokesman Bob Mansfield said the restructuring was done to save the deal from unraveling because of a small minority who oppose it. The consortium has acquired about 30% of Qantas' shares so far.
"APA is concerned that many Qantas shareholders have become discouraged from accepting the offer in the belief that the opposition to the offer from a small number of vocal shareholders may prevent us reaching the 90 percent acceptance condition," Mansfield said. "By effectively lowering that condition to 70%, shareholders can be confident that the offer will be successful," he said.
The move followed uncertainty about the deal after Balanced Equity Management announced it would not accept the consortium's offer, and perceptions that UBS Global Asset Management was also opposed. Combined, the fund managers had more than the 10% stake that would have blocked the initial bid.
Mansfield said that if the group does buy 70% of Qantas, the company would be removed from major indices.
The bid involves a complex structure of several banks and tiers of loans that initially only worked if the consortium could get 90% of Qantas' shares. Mansfield said Thursday the financiers had now agreed to deals allowing the 70% acquisition.
Analysts said Thursday's announcement would improve the bidders' chances of success. "The deal is more likely to go ahead now," said Natalie Tam, a portfolio manager at Aberdeen Asset Management.
But investors' service Moody's warned the debt involved in the restructured deal could still lead to a "multi-notch" downgrade of its rating.