Qantas rejects A$10.9 billion takeover bid

MELBOURNE, Dec 13 (Reuters) Australia's Qantas Airways Ltd. rejected on Wednesday a conditional A.9 billion (.6 billion) buyout offer led by Macquarie Bank Ltd. and private equity firm Texas Pacific Group [TPG.UL].

The offer of A.50 a share was 5 percent above Qantas's last trade. Qantas shares fell to as low as A.97 and were trading at A.02, down 4 percent, at 0004 GMT.

''The proposed offer price is A.50 per share and incorporates a number of complex conditions, the requirement for unanimous support by Qantas directors and a break fee,'' Qantas said in a statement.

''The non-executive directors consider that the terms of the proposal are not acceptable.'' Qantas said it would keep shareholders informed of any further developments.

''I don't see it as a rejection. I just see it as an update,'' said BBY analyst Fabian Babich.

''It's not clear whether it's the A.50 or the complex conditions that's the stumbling block. I suspect it's the complex conditions,'' he said.

The bidding team includes Allco Equity Partners , Allco Finance Group , Macquarie, Canadian investment firm Onex Corp. and private equity firm Texas Pacific Group [TPG.UL].

Pacific Equity Partners had been involved in the talks but dropped out, a source close to the private equity firm said.

The offer price is 26 percent higher than Qantas's share price before the airline said on Nov. 22 that it had been approached with a buyout offer.

It values Qantas at 15.6 times forecast earnings for 2007, compared with regional rivals Singapore Airlines Ltd. at 12.6 and Cathay Pacific Airways at 17.8, according to Reuters data.

''That is a fairly full price. In the ordinary course of investment cycle people would be reasonably pleased with that,'' said Guy Hutchings, chief investment officer with MFS Investment Managers.

''But the euphoria of private-equity financed takeovers at the moment and the liquidity that is driving these transactions, indicates that people would be on the back foot waiting for something higher.'' A Qantas spokesman had no immediate comment and spokesmen for the bidding consortium were not immediately available.

BBY's Babich speculated that the bidding consortium might have outlined conditions for adjusting the bid price which the non-executive directors did not agree with.

''I just feel they need more time to work out a satisfactory formula,'' Babich said.

REUTERS DKS PM0555