GENERAL INFORMATION:

Aussie Air  1990 publicly traded company

 Remained dominant at national level

 While also becoming a main player at the international level

Recently, the board of directors of Aussie Air was approached by a private-equity consortium
(DUA) with an offer to buy shares and turn Aussie Air into a privately held company.

Current Market CAP  AU$11 BILLION

DUA already has acquired some shares of Aussie Air (don’t know how many)

 They need 65% of total shares outstanding in order to acquire control of Aussie Air

Only way to acquire shares from the Aussie Air shareholder group  pay above market price

DUA could try to acquire shares from a 3rd party  (but now does not look likely)

Now Aussie Air Stock  AU$4.20

After DUAs approach  concerns of a threat of an ownership change

3 multiparty meetings

 DUA
 Shareholders advocates
 Aussie Air Management
 Australian Federal Government
 Australian Council of Trade Unions

Government, Management and Labor are NOT needed to ratify a final deal, their support
would greatly enhance the popularity of the deal and help to ensure a smooth transition to
new ownership

2 conditions are REQUIRED for an agreement:

1. DUA and the shareholders MUST agree on a cash transfer price x outstanding share
2. Aussie Air MUST remain at least 51% owned by Australian sources per a requirement
3. No agreement can be finalized before the third meeting

Down Under Air (DUA)

Aussie Air Shareholders (AAS)  (Fund Manager) control the assets of both Australian and
foreign private investors

Aussie Air Management  (CEO)

Federal Government  they have no experience with this type of deals

Aussie Air Workers  represent the interest of the workers

“If a share price has been agreed upon and the government’s ownership requirements have
been satisfied, the basic requirements for agreement have been met.”

 At this point stakeholders can choose to sign or withhold support from the agreement

CONFIDENTIAL INFORMATION:

Why Aussie Air?

 Impressive growth potential

 Unmatched position in both domestic and international markets

Regarding the purchase price:

 1/3 = cash
 2/3 = borrowings

We are the organizers, so we should establish the pace and agenda of the meetings

Objectives:

 Although DUA is not entirely Australian owned, it has been carefully constructed so
that Australian companies will own 51% of Aussie Air stock
o We are authorized to sign the agreement from the Government (but we would
prefer to retain flexibility of ownership shares)
 AAS  30% of Aussie outstanding shares // DUA  50% of Aussie outstanding shares
o We need extra 15%
o RV = AU$ 6.25 / share (lower the price, the better)
 DUA wants the right to replace current or future management whenever they fail to
secure ample ROI
 DUA wants to retain the right to reduce or outsource part of the non-managerial
labour force by carrying out repairs and maintenance whenever the market dictates it
is more efficient to do so.
 Any concessions DUA makes by signing agreements with stakeholders prior to
acquiring the company will cost and should be avoided to give DUA maximum
flexibility
 Although the government cannot llegally stop a compliant acquisition from occurring,
they can threaten to use administrative or regulatory means to delay or discourage the
deal (-200 points)
 Want to avoid a sickout from workers