More private equity firms expressed interest yesterday in joining a bid for Australia's Qantas Airways, as the carrier's shares dipped the day after plans for an audacious takeover were confirmed.
But political and legal hurdles facing the massive buyout -- priced by analysts at up to A$11 billion (US$8.5 billion) -- also emerged, as the government promised no changes would be made to laws barring the iconic airline's sale into foreign control.
"The Flying Kangaroo says Australia, and as far as I'm concerned that means majority Australian ownership," Costello told reporters, referring to the distinctive logo painted on all of the company's 200-plus planes.
Qantas stocks soared to a seven-year high on Wednesday after the airline revealed it had been approached by a consortium represented by Macquarie Bank, Australia's biggest securities firm, and US private equity firm Texas Pacific Group, based in Fort Worth, Texas.
Few details have been released by either side. Qantas said the approach was "incomplete" and it was investigating. Macquarie described it as "indicative talks."
Yesterday, Sydney-based Allco Finance Group said it may join the consortium if it goes after Qantas.
"In relation to the participation in the consortium, Allco advises that it is currently considering its participation in the indicative proposal," Allco said in a statement.
Separately yesterday, Allco executive chairman David Coe said later that the company already had plans to raise A$500 million (US$386 million) to fund overseas expansion and repay debt, and this money could be used for Qantas.
Dow Jones Newswires, citing an unnamed person it said was familiar with the situation, reported that Sydney-based Pacific Equity Partners was also considering joining Macquarie in the bid. The company was not immediately available for comment.
Qantas shares, which rose 15 percent on Wednesday, eased yesterday, as local debate about the deal centered around whether the iconic 87-year-old airline should be allowed into foreign hands. They closed A$0.07 lower at A$4.93.
Analysts expect the bid will be pitched at about A$5.50 or more.
Some government lawmakers have joined the opposition Labor Party in expressing concerns that even if the deal stays within the existing law, Qantas' assets could be broken and sold into foreign hands. Potential job cuts by any new owner is another sensitive political issue.
"The politicians are raising a few doubts about the takeover," said Margaret Morrissey, ABN Amro Morgan client adviser. "They are worried about the corporation's assets being stripped and sent offshore."
Legislation passed when the government sold the airline in 1995 bars any one stakeholder from holding more than 25 percent of the company and caps foreign ownership at 49 percent.
Under the law, Qantas' head office must remain in Australia, two-thirds of the company's directors must be Australian citizens and the chairman must be an Australian citizen.
The Macquarie-led deal could also face conflict of interest troubles because the bank is the majority owner of Sydney Airport. Analysts said regulators could consider it anticompetitive if Macquarie held large stakes in both Australia's largest airport and the port's largest customer.
Fair trade watchdog the Australian Competition and Consumer Commission said it is monitoring the Qantas takeover talks and may review any bid that emerges.