EZJ 2005

Qantas Agrees to Macquarie's A$11.1 Billion Buyout (Update8)

By Vesna Poljak

Dec. 14 (Bloomberg) -- Qantas Airways Ltd., Australia's largest airline, accepted a sweetened A$11.1 billion ($8.7 billion) buyout led by Macquarie Bank Ltd. and Texas Pacific Group, in the world's biggest aviation takeover.

The agreement was struck less than a day after Qantas rejected an initial offer, as the leveraged buyout firms dropped conditions allowing them to walk away or be paid a breakup fee if the deal collapsed. They also increased the offer by 10 cents to A$5.60 a share cash, Sydney-based Qantas said in a statement today.

The buyers will get control of an airline that's forecast a 14th straight annual profit, withstanding an industry slump that triggered $40 billion of losses by global carriers since 2001. The bid extends the busiest year of aviation deals since at least 2000. UAL Corp.'s United Airlines and Continental Airlines Inc. are in discussions to create the world's largest carrier, people familiar with the talks said yesterday.

``Qantas has a strong position in the domestic market and no other airline in the world has that kind of franchise,'' said Jason Teh, who helps manage the equivalent of $4.3 billion at Investors Mutual Ltd. in Sydney, including Qantas shares. ``There's other assets within Qantas that the market doesn't value appropriately.''

The airline's shares rose 19 cents to A$5.28, a 6 percent discount to the offer price on concern the government may block the takeover as being against the national interest. Qantas carries two out of three domestic passengers and has sent planes to evacuate Australians from Asia after terrorist attacks and the 2004 tsunami.