The Texas Pacific Group (TPG), a major private equity firm, certainly understands the airline industry. While others have been crushed (even the venerable Warren Buffett), this firm seems to understand the particular nuances inherent in the industry.
Although, historically TPG has focused on distressed airlines, the latest deal for Qantas Airways is quite the opposite. Quantas is one of the world's best run airlines, turning a profit for the past 14 years.
TPG paid a premium for this kind of performance: $8.7 billion (or about 17 times earnings for 2007). Then again, this might be a sign that TPG sees good times ahead for the airline industry, in which case, why not pay for a chunk of a great airline?
The deal's not done yet. It will need to pass muster with governmental authorities. But TPG understands these types of complexities. For example, there will not be any off-shoring of jobs and regional flights will remain in place – all of which should help with the political issues.
Want more details on how this deal went down? Check out The Australian.
Tom Taulli is the author of various books, including the Complete M&A Handbook. He also operates DealProfiles.com.
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
Reader Comments (Page 1 of 1)
12-14-2006 @ 8:35PM
burtom said...
Good to see TPG has a track record in the airline game but investors need to understand that much of Qantas value derives from the hugely iconic position it holds with Australians and in turn local politicians. This is the biggest risk to the deal. See Texas is a long way from Canberra http://australiatalks.com.au/qantas/texas_is_a_long_way_from_canberra