B&b May Fly With New York Listing

The Age

Friday September 14, 2007

Mathew Murphy, aviation reporter

BABCOCK & Brown Air may improve its chances of combining its fleet management operations with Qantas by listing on the New York Stock Exchange with a raising of as much as $516 million.

The aviation spin-off from investment bank Babcock & Brown, which will lease and acquire commercial aircraft and other aviation assets, has announced that it plans to issue shares at prices between $US22 and $US24, giving it a market capitalisation of $US773 million ($A920 million).

The money raised will help fund the acquisition of an initial portfolio of 47 aircraft from companies managed by Babcock & Brown. Analysts said the announcement bolstered Babcock & Brown Air and provided Qantas with a possible partner with which to spin off its fleet operations.

Qantas has said it plans to create a separate business to manage its fleet, which has an estimated value of $1 billion, while retaining a partial interest.

The airline is also believed to be considering a $1 billion deal to buy Lindsay Fox's transport and logistics empire, Linfox, which it would combine with its spun-off freight operations.

Allco Equity, one of the members of the failed $11.1 billion takeover bid for Qantas, was primed to break off the fleet operations from Qantas' balance sheet had the takeover gone ahead. Allco is still keen to form a joint venture, with it as manager of the Qantas fleet.

A spokeswoman for Babcock & Brown said that while it had no arrangement with Qantas to manage its aircraft, it was "open to the idea".

"Obviously we would love to do work with Qantas if we can do it at the right price but we aren't relying on them or forecasting any growth from them in our prospective forecast," she said.

Shaw Stockbroking aviation analyst Brent Mitchell said Babcock & Brown Air's capital raising could give it a better chance to broker a deal with Qantas. "It does improve their chances but it is a bit early to call until we know the structure of what Qantas is planning," Mr Mitchell said.

"I don't think the decision is aimed at Qantas but it is interesting to see Babcock & Brown and Allco morphing into similar structures ultimately."

Mr Mitchell said Allco would probably still be favoured over Babcock & Brown Air if Qantas was looking for a joint-venture partner. "You can't forget that Qantas does have a relationship with Allco already, which may improve their chances if Qantas is looking around," he said.

LINK

? www.babcockbrown.com

© 2007 The Age

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