The investor group led by Macquarie Bank trying to buy Qantas Airways made its formal pitch to shareholders yesterday, urging them to accept their offer of A$11.1 billion (US$8.6 billion) and warning it would not be increased unless a rival emerges.
The bidders also repeated their view that their offer doesn't need to be examined by the Foreign Investment Review Board -- as suggested by the government -- because it already complies with laws that ban the airline from being majority owned by foreigners because of Qantas' iconic status in Australia.
And Moody's Investors Service said yesterday that it expected that Qantas' long-term credit rating, currently Baa1, three rungs above junk status, would be lowered "several notches" if the deal goes ahead because of the debt level involved.
In a glossy bidder's statement, the private equity consortium Airline Partners Australia confirmed its A$5.60-a-share offer and sought to reassure shareholders about key issues involving the potential sale of the national carrier with the kangaroo logo.
The consortium said Qantas would remain majority Australian owned and controlled, that it had "no intention to break up the airline," that regional services would be retained at their current levels and that passengers' existing frequent flyer points would be unaffected by the buy-out.
"Qantas is a great airline and we recognize its national status and our responsibility to the flying kangaroo," spokesman Bob Mansfield said at a press conference, stressing that the bidders had proven experience in the aviation sector.
Qantas' board has recommended shareholders accept the bid by Australia's Macquarie Bank, Forth-Worth based Texas Pacific Group, Canada's Onex Corp and others, which was first announced mid-December. It would be one of Australia's biggest ever corporate takeovers.
The investor group said it backs Qantas' current management team and it's five-year, A$10 billion capital investment strategy, which aims to add 70 new plans to the airline's fleet by 2014 and increase capacity by 40 percent.
It said the offer formally opens on Monday and will close on March 9.
"Airline Partners Australia wishes to make it clear that, in the absence of an alternative proposal being announced, the offer price of A$5.60 will not be increased," the statement says.
The price values the company -- one of few international airlines running in the black -- at A$11.11 billion.
Regulator the Australian Competition and Consumer Commission is reviewing the deal.
Mansfield said that the investors hadn't yet decided whether to agree to a government request to lodge the bid with the foreign investment regulator.
"Our reply is we don't view ourselves as foreign and if you're not foreign you don't have to lodge," Mansfield told Dow Jones Newswires.
Prime Minister John Howard has said he won't block the deal outright if it complies with relevant laws, but has indicated the government may impose conditions on issues such as the location of Qantas' headquarters and various other operational and staff matters.