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Two U.S. Airline Execs To Acquire Ansett

Thu Dec 20, 2001 12:48 pm

Two U.S. airline execs to acquire Ansett

by Giles Parkinson
Posted 02:06 PM EST, Dec-18-2001

SYDNEY — U.S. investors David Bonderman and Bill Franke will assume management control of Australia's Ansett Airlines, after taking a 40% stake in buyout group Tesna Holdings Pty Ltd.

Bonderman and Franke are the principals of Air Partners III Australia llc, which announced its unspecified investment in Melbourne-based Tesna Dec. 17.

Bonderman is the founding partner of Texas Pacific Group and is credited with the rescue of Continental Airlines and America West Airlines. TPG was also an early investor of Ryanair, and Bonderman is chairman of the Irish discount carrier.

Franke was chief executive officer of America West Airlines for eight years until August and is chairman of aircraft finance company Airplanes Group plc.

Tesna struck an agreement in November to buy the assets of Ansett from the group's administrators, Andersens, which was appointed in September after former owner Air New Zealand Ltd. could no longer meet the airline's capital requirements.

Tesna will buy Ansett's terminals, Melbourne-based headquarters and equipment for A$1.1 billion ($569 million). Tesna also agreed to lease 29 planes worth A$2.4 billion from United Airlines.

Sources close to the deal said financial arrangements between Air Partners and Tesna will not be publicly revealed, but Air Partners would contribute its share of the equity required to capitalize the business and satisfy the demands of creditors and administrators.

Tesna was formed by Melbourne businessmen Solomon Lew, a clothing manufacturer, and Lindsay Fox, a trucking magnate, who have said they have no desire to manage the business.

"Lew and Fox identified the opportunity. They are not operators. Air Partners have the experience of engineering turnarounds," a source said.

The source described Ansett as a similar challenge to Continental and America West, saying that in Australia, administration is similar to Chapter 11 proceedings in the U.S., "as it offers the same ability to renegotiate terms and create a new business opportunity."

The source said the chief executive and chief financial officer openings were down to short lists and announcements were expected within a month.

Aviation industry sources in Australia said two rival bidders had approached Air Partners for Ansett before concluding a deal with Tesna.

They said Bonderman and Franke had discussed an investment in Richard Branson's Virgin Blue, a 15-month-old Brisbane-based discount carrier that has since teamed with logistics group Lang Corp. to make a bid for Ansett assets. Air Partners also talked with Anstaff, a consortium of current and former staff who failed to find financial backers.

Lew and Fox have said they intend to remain long-term shareholders in Ansett, although they have not ruled out a sell-down of their stake in an initial public offering in a few years.

They held talks about management control and an equity investment with Singapore Airlines Ltd., which had been a major shareholder in Air NZ and has long held a desire to own an Australian carrier.

"The common theme in the [Bondeman and Franke] airline investments is an active and direct involvement to achieve significant improvement in operating and financial performance and business turnaround," Lew and Fox said in a joint statement.

"Ryanair, for example, has been transformed from a niche operator to become the second largest airline by market capitalization in Europe, with a value higher than British Air."

Bonderman said in the same statement that Ansett represented an "unique circumstance" to restore and build value.

The Air Partners investment comes amid speculation about the future ownership of other major aviation assets in the region, including Qantas Airways Ltd., Air NZ and Auckland Airport Ltd.

Qantas shareholder BA is rumored to be considering a sale of its 23.2% stake, and SIA has been named by several brokers in Australia as a potential buyer. SIA, which was outbid by BA when the Australian government sold an initial 25% stake in 1992, declined to comment.

Qantas is also reportedly negotiating the purchase of a stake in Air NZ, which had to be rescued in October by a NZ$1.035 billion ($431 million) capital injection from the New Zealand government, which now owns an 83% stake.

Qantas chief executive Geoff Dixon is due to meet New Zealand finance Minister Michael Cullen on Wednesday. Cullen issued a statement Monday saying that a Qantas investment was not on the agenda, but analysts can see little other reason for the two to meet.

New Zealand rejected a proposed rescue plan of Air NZ by SIA after Australia lobbied to have a rival plan by Qantas accepted. Qantas owned a 19.9% stake of Air NZ until early 2000.

The effective withdrawal of SIA from Air NZ — it now only holds a 4.2% stake after the government bailout — has led another Singapore government owned operator, Singapore Changi Airport Enterprises Pte Ltd., to sell its 7.1 % stake in Auckland Airport.

The stake was sold Tuesday for NZ$107 million, delivering a book profit of NZ$20 million on its 2-year-old investment. The airport's biggest shareholder is the Auckland City Council, which also wants to sell its 25.8% stake.

Source: TheDeal.com