Qantas bid on hold

Qantas bid could have succeeded

Miscalculations by hungry hedge funds in a giant game of brinksmanship appear to be the key reason behind the apparent crash of an A$11 billion takeover offer for Australia's Qantas Airways Ltd , analysts said.

Qantas shares remained on hold Monday night after questions were raised if in fact the bid team had reached the required 50 per cent. A condition of accepting the offer was that it was all or nothing. This measn any seller who sold only part of their shares is in fact required to sell all their shares, which will leave the bid with over 60 per cent.

Local newspapers named U.S. billionaire Samuel Heyman, who holds 11 percent of Qantas, as the investor who offered a 4.9 percent stake in the airline five hours after the deadline.

That would have pushed acceptances to 50.6 percent, and kept the deal alive for another two weeks, allowing hedge funds another two weeks to buy cheap stock. An array of hedge funds had bought more than 40 percent of the airline over recent months, analysts have said, expecting to make gains on the difference between the company's share price and the A$5.45 a share offer by bidding group Airline Partners Australia.

The stock has never traded up to the offer price as opposition to the bid has created uncertainty about its success, allowing hedge funds to buy from local investors who feared the share price would fall if the bid failed.

The bid group needed to reach 50 percent of shareholders acceptances by a Friday deadline to trigger a two-week extension of the offer, before it reached the 70 percent level needed to close the bid.

Analysts said hedge funds hoped to engineer an outcome where the offer just edged over 50 percent, creating another two weeks of uncertainty and providing more opportunity to buy stock below the offer price from nervous retail and institutional investors.

Instead, they miscalculated. The bid group won just 46 percent of acceptances, scuttling the bid.

Hedge funds stand to lose hundreds of millions if the Qantas share price falls when trade resumes.