After hearing that the Qantas (ASX: QAN) takeover by Australian Airline Partners was supposedly back on again after an earlier announcement that they had not reached the 50% threshold in order to trigger an automatic two week extension, we thought it may be a good opportunity to read the rules and regulations governing a takeover.
Before we realised our terrible mistake, we made a beeline straight for the Takeovers Panel website. Once there we hoped to be treated to some very basic information, in an easy to read format.
Unfortunately we can confirm that we were disappointed. We are almost sympathetic towards US hedge fund mogul Samuel Heyman. It seems as though he too was so confused by the whole process that his hedge fund just didn’t submit the acceptance of the offer in time.
Even the role call of honour for prospective Takeover Panel members seems to run to a cast of thousands, all vying to be nominated and hoping that their various professional interests don’t rule them out of contention due to pesky old conflict of interest rules.
But we can still barely believe that the whole Qantas takeover, a takeover by private equity firms, has been cuppered by the incompetence of a cousin to private equity, namely a hedge fund. We can only think that the personnel at Heyman’s hedge fund – doubtless based in Connecticut – were too busy counting out the performance fees on their funds, and just missed the deadline.
Or maybe, just maybe it was as simple a mistake as forgetting about the fourteen hours time difference between the east coast of Australia and the east coast of America.
Whatever the reason, it has cost Macquarie Bank (ASX: MBL) and the rest of the APA consortium members a bucket load of cash. Of equal importance it has cost the investment bankers a bucket load of cash too. What with Christmas only seven months away, we hope they will have enough spare change to have a turkey on the table. Maybe it isn’t too late for them to sign up for a Chrisco Christmas hamper!
And if APA thought that they may be able to sweet talk the Takeovers Panel into allowing the late acceptance to be included, well, they were horribly mistaken. Given all the hoops and regulations and seemingly arbitrary timeframes for various things, it would have made a complete farce of the occasion if they had allowed it to continue. Clearly they were worried about the precedent it would set.
Which got us to thinking. Is it really necessary for there to be so much regulation governing takeovers? What is it that regulators are so afraid of that they create the vast quantity of hoops for buyers to jump through?
What is wrong with a investor building up a stake of 20%, 30% or 50% without moving to take over the whole company? Why should existing investors have to sell their stake in a company during a takeover if acceptances move above 90%?
We can see that there are probably a handful of reasons why takeovers are governed to such an extreme, but we wonder whether it would help to create an even more liquid equity and capital market if regulators loosened the chains even a little bit?
But after all that we now move to the most exciting part of the action, and that is how the Qantas share price will perform in this mornings trade. There were plenty of fund managers who believed that the share price would not fall below $5, and even some who thought it would stay roughly where it closed on Friday at $5.39.
However, just as it was an errant hedge fund that put the brakes on the deal going through, we wonder how many of those hedge funds that supposedly hold 40% of Qantas shares will hang around and how many will run for the exits.
Your correspondent’s eyes will be firmly fixed on the trading screen this morning.
The Daily Reckoning Australia