Yesterday we were reluctant to use a particular phrase in describing the debacle surrounding the closing stages of the Qantas (ASX: QAN) takeover bid by Airline Partners Australia. The phrase that we didn’t use, but which we have no such problems with using now, is to compare APA with the Keystone Cops.
We can almost picture the APA wunderkinds racing towards Qantas all piled into their 4WD, but just as they think they are there they hit a bump in the road – not so much a sleeping policeman as a sleeping Samuel Heyman – and out they all pile, face down in the dirt.
Their 4WD barely remains on the road moving ahead under its own steam as the APA dumbkopfs chase after it, stumbling and falling over each other.
In reality, no-one has come out of this sorry event with any credibility whatsoever: Qantas; its directors; APA; Macquarie Bank (ASX: MBL); ASIC; Takeovers Panel; institutional shareholders; and the ASX.
In some form or another they have all contributed to a saga that really shouldn’t have been that difficult. Let’s think about what the proposition was: a consortium of institutional investors wanted to buy an airline for a specified price, by a specified date. How difficult can that be? Hundreds of thousands of trades are executed on the stockmarket under exactly the same rationale.
Perhaps on a slightly different scale, property is bought and sold based on what the buyer is prepared to pay and what the seller is prepared to accept. Easy.
So why is it that the Qantas takeover lurched from one embarrassment to another? One reason surely has to be the unnecessary conditions, procedures and regulations that surrounded the proposition. The old phrase of KISS (keep it simple, stupid) should surely have been applied here.
Rather than letting the market decide on a suitable price, both sides of the transaction were shackled to ensure that certain caveats were included as part of the deal. Then there are the hoops that need to be negotiated in order for a takeover to be approved and completed. Much of the requirements appear to an untrained eye – such as your correspondents’ – to be completely arbitrary.
With this tale of woe we almost need twice as much space to go through it all, but we will contain ourselves. Instead we will just touch on a few of the many, many things that irked us about this transaction.
First, the tap-dancing that APA was forced to do in order to make sure that the proposal even got to taxi from the terminal, let alone take off was extraordinary. Let’s be honest, does it really matter whether Qantas is Australian owned or not? It is quite rightly an Australian icon, but does that mean to say it needs to be owned by the several thousand shareholders who are mostly Aussies as opposed to being owned by a few big investors?
Second, the Takeovers Panel and the takeovers process as a whole is ludicrous. As with most regulation the laws governing takeovers appear to have started with a genuine interest in making sure there is a level playing field and that the market cannot be easily manipulated. However, looking at the myriad of rules it is clear that more and more scenarios are added in order to cover every single contingency possible. We can picture the bunch of lawyers sitting there, drafting the rules: “But what if this happens?” “Good point, we’ll prevent that from happening.” “But what about this?”… and so on.
Finally, the ASX hasn’t come out of this unscathed either, and nor has the so called ‘continuous disclosure’ provisions. As your correspondent kept an eye on Qantas prior to yesterday’s open, we were convinced that the shares would begin trading shortly after 10am. But no, nothing happened. Not a whisper, nothing until 10:50.58 stating “Notice received.”
It wasn’t until 11:16.48 that it was officially revealed that Qantas was in a trading halt, more than an hour after it should have opened. But, could we read it? No, because unless we pay the ASX an extra fee we have to wait until 20 minutes after the announcement before we can view it. It certainly makes a complete mockery of all investors having equal access to all information.
Don’t be surprised if the Qantas Takeover Saga keeps the budget off the front pages.
for The Daily Reckoning Australia