DataRoom AM: Qantas about-turn

Qantas Airways’ senior management team is believed to have officially scrapped an idea to partially divest the firm’s frequent flyer division after reports emerged yesterday that such a plan was under pressure.

Elsewhere, Glencore keeps a watch on BHP Billiton’s assets, Woodside Petroleum puts M&A activity firmly back on the agenda and the Newman government nears a decision on advisory roles for its proposed asset sell-off.

Qantas Airways’ board is expected to next week sign off on a decision by senior management to shun a partial listing of its $3 billion frequent flyer division on the ASX. According to The Australian Financial Review, the ‘no’ decision will be announced in conjunction with the firm’s latest earnings release next Thursday, with a float seen by management as a short-term solution that could come back to haunt in the future. The airline may have also struggled to extract full value from a division that should command a valuation of $3bn-plus at a time when the entire company is worth just $2.8bn.

While the frequent flyer call has been all but made, it is believed the national carrier is still weighing a split of its domestic and international arms. Such a move could draw in more foreign capital, in a similar manner to rival Virgin Australia.

Qantas’ decision to spurn an asset spinoff is in contrast to that of BHP Billiton, which has drawn plenty of market interest for its planned $10-$15bn demerger. Among the most interested observers is Glencore’s Ivan Glasenberg, who has admitted to keeping a close eye on two assets slated for the demerged entity.

Announcing strong earnings numbers overnight, Glasenberg singled out Columbian nickel mine Cerro Matoso and BHP’s South African coal assets for particular attention, labeling them as lucrative assets. The comments will serve to fuel speculation Glencore could be a prospective suitor for the demerged BHP business, despite Glasenberg warning takeover interest was likely “a long time away”.

Also in resources, the potential takeover of PanAust comes back under the market spotlight today as the firm releases its latest earnings. There has been no news on the $1.4bn takeover bid from major shareholder Guangdong Rising Assets Management since PanAust said in July that GRAM and “other interested parties” were undertaking due diligence. There is waning optimism a deal will proceed, according to the AFR, with speculation swirling that GRAM is struggling to produce a suitable final offer and no other buyers are waiting in the wings.

In infrastructure, investment banks are falling over themselves in pursuit of advisory roles on a potential $30bn asset selloff in Queensland. According to the AFR, pitches are taking place in Brisbane this week ahead of an August 31 decision deadline. In all there are four mandates up for grabs, with the most lucrative role seen to be an advisory position in the sale of stakes in electricity distributors Powerlink, Energex and Ergon Energy.

Meanwhile, ASX-listed Japara Healthcare has put forward a number of bids for smaller aged care operators as it seeks to make good on expansion promises outlined in its prospectus, the AFR reports. However, the firm has reportedly decided against a play for IPO hopeful Estia Health despite rumours of its interest.

In energy, Woodside Petroleum has a war chest to tap into after pulling out of a planned $3bn entry into the mammoth Leviathan gas project earlier this year, with boss Peter Coleman yesterday hinting an acquisition of as much as $5bn may not be too far away. Given several global energy behemoths are simplifying their portfolios, there should be no shortage of options in the near-term.

Elsewhere, AGL Energy has confirmed a $1.23bn capital raising to fund its $1.5bn purchase of Macquarie Generation, while Karoon Gas has detailed plans to pursue a $92m on-market share buyback in the wake of its $650m divestment of a stake in the Poseidon gas field.

Finally, Seek has indicated it will continue to chase offshore growth via acquisition, with Bangladesh a particular focus, while APN News & Media has divulged similar plans for expansion, though Australia will remain its focus.