Qantas to buy rest of Alliance Aviation for $443 million to tap mining sector demand

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FILE PHOTO: Qantas aircraft are seen on the tarmac at Melbourne International Airport in Melbourne

By Sameer Manekar

(Reuters) -Australia’s Qantas Airways said on Thursday it would buy the remaining 80% stake in Alliance Aviation Services for A$610.8 million ($443.14 million) in an all-stock deal to expand its footprint in the charter business.

The deal will allow Qantas to incorporate Alliance’s charter fleet and “efficiently” serve customers in the Australian mining industry, as the full reopening of international borders is expected to see an influx of workers and increased activity in the 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,” Qantas Chief Executive Officer Alan Joyce said.

Alliance investors will get A$4.75 apiece, a more than 35% premium to the stock’s last close and values the whole aviation services provider at A$764.5 million. In comparison, Qantas paid almost half of its current offer to buy the initial 19.9% stake in Alliance in early 2019

“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,” Alliance Chairman Steve Padgett said.

Alliance shares soared 26.5% to A$4.44, marking their biggest intraday jump since May 2020, while Qantas edged lower.

Alliance said in a separate statement that its directors unanimously recommended the deal.

Sydney-based Qantas said agreements already in place with Alliance would not be affected by the deal given the time it would require securing the approvals.

Qantas has notified the country’s competition watchdog of the deal along with details of the anticipated benefits to customers.

The Australian Competition & Consumer Commission told Reuters it had been contacted by Qantas and that it would “scrutinise the proposed acquisition very closely”.

The commission had investigated Qantas’ 2019 stake buy in Alliance. Last month, it made no antitrust objections to the deal, but kept its door open for any further investigations.

($1 = 1.3784 Australian dollars)

(Reporting by Sameer Manekar in Bengaluru; Editing by Anil D’Silva, Aditya Soni and Subhranshu Sahu)