Qantas share price stalls amid Alliance Aviation acquisition

A new acquisition deal has hit the runway, but will it take off?

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Key points

  • The Qantas share price is trading 1.59% lower to $5.58 on the back of the airline's acquisition news
  • Australia's largest airline operator has made a $919.2 million bid for charter operator Alliance Aviation
  • The deal will likely be the subject of scrutiny by the ACCC after eyebrows were raised back in 2019

The Qantas Airways Limited (ASX: QAN) share price is back in focus today after its latest big announcement. Australia’s largest airline is set to become even larger as it looks to fully acquire Alliance Aviation Services Ltd (ASX: AQZ).

Qantas shares are swapping hands at $5.58 in early morning trade, a fall of 1.59%. The airline operator’s shares have been making a resurgence since the new year ticked over. Notably, the share price is up by around 9%, while the broader market is still in the red year-to-date.

Meanwhile, the Alliance Aviation share price is soaring this morning, up 26.5% to $4.44 at the time of writing.

Let’s take a look at what this deal entails.

Big deal for competition in the air

Investors will be attempting to revalue the Qantas share price today as the airline makes a play at gobbling up air charter services operator, Alliance.

According to the release, the two companies have entered into a scheme implementation deed for Qantas to acquire the remaining 80% or so shares on issue.

The agreed-upon consideration is one Qantas share at $4.75 per Alliance share. This represents a 35% premium to the $3.51 Alliance share price at yesterday’s close. Additionally, it values the fly-in, fly-out operator at an enterprise value of $919.2 million.

Under the terms of the deal, Alliance will be permitted to pay out one or more cash dividends before the scheme becomes effective. However, any dividends paid out to shareholders will reduce the total consideration appropriately.

Importantly, the deal will need to get the all-clear from the Australian Competition and Consumer Commission — an objective that might be difficult considering the fuss generated when Qantas took a 19.9% stake in Alliance back in 2019.

The Qantas share price is essentially flat since it acquired its initial interest in Alliance.

What is management saying?

The smaller airline operator is keen on making the deal happen. Indicating this, Alliance chair Steve Padgett said:

Our three core principles of safety, operational excellence (reflected in market leading on-time performance) and profitability have underpinned our success. Qantas is Australia’s national carrier and has been operating for more than 100 years. It has a consistent approach to business and would be a quality ongoing owner of our business.

Meanwhile, Qantas CEO Alan Joyce highlighted that the acquisition would mean an improved QantasLink, better positioned to compete in a highly competitive market.

What’s next for the Qantas share price?

From here, the acquisition will be subject to competition clearance, an independent review on behalf of shareholders, Court approval, and shareholder approval.

Furthermore, Alliance said an update with more details will be provided in time. In the meantime, the deal carries a $7.6 million break fee to Qantas if Alliance walks away.

Qantas boasts a market capitalisation of $10.69 billion based on the current Qantas share price.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alliance Aviation Services Ltd. The Motley Fool Australia has positions in and has recommended Alliance Aviation Services Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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