The proposed takeover of Qantas Airways has taken a major step forward having cleared its two major obstacles with the Australian government.
The first was the issue, raised by the competition commission, of Macquarie Bank taking a 15% stake in Qantas when it already holds a 13% stake in the company that runs Sydney airport. Even though the commission found last year that Sydney abused its monopoly by favouring Qantas on landing charges, it concluded the bank had no clear incentive to favour Qantas at the airport.
The commission was influenced by the bank's agreement with Airline Partners Australia (APA), the consortium seeking to buy Qantas, that it would not vote on any commercial arrangement in which it had an interest.
The hurdle that caused the most furore was the examination of the takeover by Australia's foreign investment review board, with Treasurer Peter Costello having the last word on whether foreign investment in Qantas threatened Australia's national interest. It was never clear that the board or the treasurer had jurisdiction over this issue, as the APA had structured its bid to stay under the legal minimums.
In response to political pressure, however, APA applied for approval. The review board did not find that APA exceeded any limits on foreign ownership in Qantas. To calm political concerns, APA negotiated a deal clarifying the jurisdictional uncertainty under which it gave the government a legally enforceable deed allowing Canberra to monitor the level of foreign ownership. In return, Costello said he would raise no objection to the takeover.
Commitments in the deed include promises to keep Qantas headquartered in Australia, maintain an integrated route network and protect the frequent flyer plan. Unions complained about the lack of any commitment to keep jobs onshore, however.
Questions remain about whether Jetstar, the low-cost unit of Qantas, is subject to the same legal restraints. Qantas pilots have also complained to the Australian takeovers panel. Under an extended deadline, Qantas shareholders have until early April to approve or reject the takeover. The offer values Qantas at A$11 billion ($8 billion).
The deal has a commitment to keep Qantas headquartered in Australia
Source: Airline Business
