We’ve received more feedback on the Qantas (ASX: QAN) saga than any other topic this year. Most of the questions appear to centre around the perceived or actual conflicts of interest by the board; the now seemingly low-ball offer; and the incompetence of Airline Partners Australia and Qantas management.
Reader Don Nixon, he asks, “Are they [Geoff Dixon and Margaret Jackson] working for Qantas? If they are why are they pushing so hard to sell at the offered price when it seems most agree that price should be higher? If they are working Qantas why are they going to be paid $100 million and $40 million respectively? If they are working Qantas shouldn’t this money go to Qantas shareholders instead of them?”
It’s a fair point isn’t it? We wonder what the attitude of Qantas management would have been if regular members of staff had taken payments from a rival bid. Would that have been deemed acceptable? We wouldn’t have thought so.
Can you imagine if for instance the Blackstone private equity group and Babcock & Brown (ASX: BNB) had approached senior managers at the level below Geoff Dixon and offered them financial incentives if they could convince shareholders to vote for that deal rather than APA.
There is little doubt that once the dust has settled that the Australian Securities and Investments Commission, if they are to prove that they do have teeth – should begin making enquiries into the actions of Qantas board members to determine if they acted appropriately in the circumstances.
Whatever spin anyone puts on this deal there is only one real explanation…
We have alluded to this potential problem at Macquarie Bank (ASX: MBL) for some time, so it is not the first time that you will have heard this argument.
Up until about two or three years ago, Macquarie Bank were the unrivalled kings of structured investments. It was simple, they would overpay for an asset then restructure it by shoving it into a fund, charging a hefty management fee and then selling it on at an even bigger premium to retail investors.
But then it all started to go sour. The first major embarrassment entering a bid for the London Stock Exchange that was actually significantly below the previous bid by Deutsche Bourse.
Following that we saw the Macquarie investment bankers search high and low for the next greatest infrastructure fund that would make the banker famous. A few acquisitions took place in the UK including the Isle of Man ferry service.
However, it was obvious at this time that something had to give. And eventually it did. As they carried on looking for new investments the quality of the search become compromised and the cockiness of the bankers increased. Thus, when it came to Qantas the investment bankers from all corners were still unable to get themselves together to ensure that the deal was executed as planned.
The fact is that the Qantas bid is dead. It can only be a matter of time before the Qantas board resign or at the very least put themselves up for re-election at the next annual meeting. The former would be the most gracious option.
The Daily Reckoning Australia