Qantas has agreed to acquire all of the shares in charter flight operator Alliance Aviation Services via a scheme of arrangement, the two airlines announced on Thursday.
The scheme would see Alliance shareholders receive $4.75 in Qantas shares for each Alliance share held, with Qantas set to issue about $614 million in new shares as part of the transaction.
Alliance said that the deal offered an “attractive premium” of 35 per cent above the company’s closing price of $3.51 on 4 May.
“The transaction represents a compelling opportunity for our shareholders to exit the Alliance business following a period of significant industry upheaval, and to realise a strong return on Alliance’s fleet assets,” said Alliance chairman Steve Padgett.
“The transaction structure enables our shareholders to continue to participate in the Alliance story, albeit as part of an expanded Qantas Group or should they choose, to crystallise a cash payment by selling the Qantas shares issued to them following implementation of the scheme.”
Qantas originally acquired just under 20 per cent of Alliance in February 2019 and outlined its long-term interest in acquiring the airline in full.
Alliance provides charter flights to the mining, energy, tourism and government sectors through its fleet of 15 E190, 24 Fokker F100, 13 Fokker 70LR and five Fokker 50 aircraft, while an additional 16 E190s are set to be added to its fleet this year.
Qantas said that the acquisition would allow it to better serve the resources sector.
“The resources sector continues to grow and any new tender for airline services will be very competitive. It makes a lot of sense for us to combine with Alliance to improve the services we can offer, which is a positive for both airlines as well as the travelling public,” said Qantas CEO Alan Joyce.
“We’ve opened up several new passenger routes using up to 18 of Alliance’s E190s, so bringing all 33 of these aircraft, plus their crews, into the Qantas Group would really expand what we could achieve.”
The deal remains subject to vote from Alliance shareholders and well as competition clearance. Alliance’s directors unanimously recommended that shareholders vote in favour of the scheme.
“There is strong industrial logic for Alliance to be part of the Qantas Group,” commented Alliance MD Scott McMillan.
“The transaction combined the parties’ complementary fleets and operations, allowing for more efficient and sustainable services and crew, as well as fleet maintenance synergies resulting from the ability to cross cover scheduled and non-scheduled maintenance.
“We expect these operational benefits to translate into valuable customer experience benefits, including less aircraft downtime, fewer disruptions and greater aircraft availability to fulfil ad hoc charter requests.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.