Qantas Freight (QAN) and Linfox

Submitted by Craig Strzelecki on 13 September, 2007 - 23:18

Qantas is looking to bolster their new stand-alone freight arm by looking to purchase Linfox transport logistics. It is tipped that Lindsay Fox will likely demand about $1 billion for the logistics empire. The cash rich airline would still be able to fund the purchase with its own resources and continue with its billion dollar share buy-back. Qantas management, led by its chief executive, Geoff Dixon, and the finance director, Peter Gregg, are understood to favour buying Linfox as the first step to reinforcing its existing air and ground freight arm, before floating the combined entity as a separately-listed public company. This was launched on the back of its record 2006-07 $1 billion profit performance announced just four weeks ago. Mr Dixon, who confirmed in New York on Monday that the freight division was already operating under its new corporate structure, has made it clear Qantas intends to keep majority control of the three large subsidiaries that could be spun off from the main group in the next 18 months. Lindsay Fox, the 70-year-old billionaire founder and his son Peter, who is now chairman of the business, recently indicated they were interested in selling a majority stake to one partner. They are likely to cut their total ownership of the company to between 20 and 40 per cent, fuelling the belief that a Qantas takeover may be in the offing. "[The family] may look for a partner … to go on a journey with them, which is more likely," the chief executive of Linfox Logistics, Michael Byrne, told the business magazine BRW a fortnight ago. In a note to clients yesterday, Merrill Lynch assumed the combined Linfox businesses were making earnings before interest and tax of $80 million. It came to its $1 billion price tag by multiplying that figure by the 12 times earnings forecast on which its major rival, Toll Holdings, is valued by the sharemarket. Purchasing Linfox would propel Qantas to the number two slot in the local logistics and freight forwarding market behind Toll Holdings. Qantas Freight Enterprises, as the business is now known, recently completed its first acquisition overseas, sealing the $50 million deal to buy Singapore-based DPEX Worldwide, which operates in 19 countries, including Hong Kong, Singapore and China. Linfox has also been active overseas and now has businesses in 11 other countries.Qantas (QAN) shares rose 4c yesterday to $5.66.

Qantas Airways Limited is listed on the Australian Stock Exchange (ASX) under stock code QAN. You can view their investor website here. QAN was listed on the ASX on 31 July, 1995. Margaret Jackson is the chairperson for Qantas and Geoff Dixon is the CEO. The company is involved in the operation of international and domestic air transportation services, the sale of worldwide and domestic holiday tours and associated support activities including catering, information technology, ground handling and engineering and maintenance. They also also operate subsidiary businesses including other airlines, and businesses in specialist markets such as Qantas Holidays and Qantas Flight Catering. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade QAN. Check your charts and good luck with your share trading!

More about