M&A

Alliance Aviation up 20% as Qantas moves to acquire charter provider

Thu 05 May 22, 12:40pm (AEST)
Qantas Travel Plane Flight
Source: iStock

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Key Points

  • Alliance Aviation shares were up 20% from $3.50 yesterday close to $4.30 in pre-lunch trades today
  • Qantas is to acquire the outstanding 80% in AQZ through a scheme of arrangement after purchasing a 20% stake in 2019
  • Qantas will take on 70 aircraft, give Alliance shareholders Qantas shares worth $4.75 for each Alliance share held
  • Qantas will then issue new ordinary shares to a value of over $600m

Alliance Aviation (ASX:AQZ) shares shot up over 22% today in pre-lunch trades as the relatively quiet flights provider gets ready to be acquired by Qantas Airways (ASX:QAN)

Shares closed yesterday at $3.50ps; they are now worth $4.30 in the space of under 24 hours. Alliance will provide Qantas with a fleet of 70 jet aircraft, each capable of seating up to 100 people. 

Qantas notes today in its announcement for the acquisition that the Alliance fleet will likely provide vehicles to Qantas to be used in charter flight operations, as opposed to direct commercial travel. 

Alliance counts for some 2% of the domestic aviation market in Australia and regularly flies to a number of mine sites throughout the country. 

(Source: Alliance Aviation) map detailing Alliance's flight routes through Australia
(Source: Alliance Aviation) map detailing Alliance's flight routes through Australia

Acquisition builds on 2019 20% stake 

Qantas previously purchased around 20% of Alliance back in February of 2019 and the two players have previously executed agreements that awarded Alliance the right to operate up to 18 jets for QantasLink in a bid by the national carrier to expand its regional Australian flight paths. 

Qantas notes the acquisition will likely take several months to clear regulatory hurdles within the country before Alliance becomes a wholly-owned part of Qantas group. 

Of interest to shareholders with regards to compliance will be the fact the ACCC has already investigated Qantas and Alliance for the former's acquisition of a 20% stake.

The regulator determined after a thorough inquiry the 2019 move did not lessen competition in the Australian market. 

Scheme of arrangement

Qantas will acquire Alliance's retained 80% stake through a scheme of arrangement that is to give Alliance shareholders Qantas shares worth $4.75 for each share they hold. 

Qantas shares are currently priced at $5.61 in lunchtime trades.

Qantas will also issue news shares valued at around $614 million in a transaction "expected to be EPS accretive for Qantas shareholders, before synergies." 

The national carrier contacted the ACCC on its own volition today to commence the compliance process. 

It is likely that high levels of attention from the regulator, media and investors will characterise the process, given the size of Qantas in the national aviation market. 

The look of Alliance Aviation's charts today
The look of Alliance Aviation's charts today

 

Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication. Email Jon at [email protected].

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