Qantas Takeover Shenanigans Overshadow Australian Tax Cuts

Nevermind Qantas for a moment, tax cuts for everyone!

Before we get too excited about the tax cuts just remember three things.  First, any money that the government hands back in tax cuts is your money anyway.  Second, that despite its ‘generosity’ the government will be left with a $10 billion profit (in government circles they call it a surplus) as a result of overcharging (ie. Over-taxing) the population.  And thirdly, that $10 billion equates to approximately $500 for each and every Australian citizen which the government apparently believes it can utilize better than you.

Anyway, we are supposed to be grateful.  And perhaps we should be.  Governments being what they are, this one could easily have kept the wallet firmly closed.  Second thoughts – we don’t know what came over us there, we could buy ourselves a small to medium sized LCD television for $500!

But somehow the budget is just a little ho-hum when compared to the excitement of the Qantas (ASX: QAN) takeover shenanigans.  We all knew there would be a tax cut of some sort.  We all knew a few bob would be thrown at education and health.  And we all guessed that the ‘light’ green vote would be shored up with some sort of half-baked, half-hearted subsidy.  We were not disappointed.

The same could not be said for Qantas.  Nothing could be safely predicted.  When there are millions of dollars at stake in fees to be earned by investment bankers, it is not surprising that it took them until yesterday morning to finally concede defeat – for now.

Although we rather get the feeling, like a flock of vultures that have been temporarily scared away from the carcass, that it won’t take long before they begin circling above the Qantas beast again.  At least they will if the present board and management retain their positions.

If influential shareholders have anything to do with it, and if the board have any sense, they will realise the error of their ways and call it quits.  Whether Qantas remains in its current ownership status or whether it is acquired by private equity or anyone else is of little consequence to your correspondent.

However, when well paid management and directors decide to sell out, not because they necessarily believe the takeover to be a good deal for shareholders, but because they stand to receive handsome compensation if the deal is successful, crosses the line.  The Qantas board should do the honourable thing and bale out now.

Something else we wonder about is where this shambles leaves Macquarie Bank?  This is the second major deal in the space of just over a year where it has had to lick its wounds and walk away.  The first being the miscalculated attempt to acquire the London Stock Exchange.

As a result of this torrid affair, there are even rumours abounding the stockmarket that Macquarie Bank are incapable of organising a takeover in a bull market.  Naturally we would like to disassociate ourselves from any such rumours – scurrilous as they are.

Yet, when we read the tales yesterday of submissions being made to the Takeovers Panel, to ASIC, even potentially to the High Court, all on the basis of a clause which contrary to press reports was not that obscure at all.  In fact, if one visits the Airline Partners Australia website and views the bidders statement, the clause explaining that acceptances are all or none is written as plain as day in bold type.

This is what makes it even more extraordinary that it took them two days to realise that they may have satisfied their own requirement, despite conceding early.

Maybe that scurrilous rumour does have a sniff of truth about it afterall.

Kris Sayce
Markets and Money

Kris Sayce
Kris Sayce, dubbed the ‘Jeremy Clarkson of Australian finance’, began as a London finance broker specialising in small-cap stock analysis on London’s Alternative Investment Market (AIM). Kris then spent several years at one of Australia's leading wealth management firms. A fully accredited advisor in shares, options, warrants and foreign-exchange investments, Kris was instrumental in helping to establish the Australian version of the Markets and Money e-newsletter in 2005. He is currently the Publisher, Investment Director and Editor in Chief of Australia's most outspoken financial news service — Money Morning.

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I’m surprised at you. Did you expect these people to become suddenly competent in the space of 24 hours ?

The board needs to walk, before they are pursued by an angry lynch mob (aka shareholders).

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