The buyout of Australian airline Qantas hung in the balance last night after a key shareholder said that it would vote against an $11 billion (£5.6 billion) private equity bid because it undervalued the groupBalanced Equity Management, which owns 4 per cent of Qantas.

Balanced Equity Management, which owns 4 per cent of Qantas, said in a letter to the Australian Stock Exchange that “given the current level of the share market . . . we do not intend to accept the bid of $5.45 per share in respect of the shares we manage on behalf of clients”.

The buyout of Qantas, led by Macquarie and Texas Pacific Group, would be the largest ever leveraged deal of its kind in Australia.

In a statement, Airline Partners Australia, the name of the bidding consortium which also includes Allco Equity Partners, Allco Finance Group and Canadian investment firm Onex Corp, said: “Airline Partners Australia is considering a range of alternatives in light of the announcement.”

A spokesman for the consortium was not immediately available to comment further.

The group has said in the past that it will not raise its bid, which has already been accepted by about 29 per cent of Qantas investors.

The deadline for shareholders to vote on the offer has been extended until April 20.

Analysts said the consortium could also be forced to drop the condition that it wins 90 per cent of shareholder acceptances if a second key shareholder, UBS Global Asset Management also rejects the offer.

UBS owns 7 per cent of Qantas and is believed to have privately criticised the offer as too low.

If it comes out against the bid, other smaller investors could follow suit.

Qantas shares fell more than 6.3 per cent on the news that Balanced Equity was rejecting the offer, before recovering slightly to end the day just over 3 per cent down, at $5.06, still below the consortium’s bid.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive