NEW ZEALAND. Auckland International Airport Limited (Auckland Airport) directors today announced that discussions with Canada Pension Plan Investment Board (CPPIB) over a proposal for CPPIB to acquire a significant interest in the airport company have ceased.
In a statement the company said: “A majority of directors of Auckland Airport do not believe that pursuing the proposal would be in the best interests of shareholders or the company and therefore will not be recommending the proposed transaction.
“One director, Michael Smith, is of the view that the proposal is in the best interests of shareholders and should have been put to shareholders with a positive recommendation.”
“CPPIB was clearly not able to bring industry or tourism experience which makes them a less attractive option when compared with the DAE [Dubai Aerospace Enterprise – Ed] proposal which the Board unanimously recommended“ |
AUCKLAND AIRPORT |
Chairman John Maasland said the proposal would have involved an amalgamation and the creation of a newly listed airport company. Under the deal CPPIB would have owned between 39% and 49% of the new entity.
“If the amalgamation proposal went ahead existing Auckland Airport shareholders would have retained between 51% and 61% of the new company and maintained an investment in the restructured company,” Maasland said.
“The Board needed to be certain it was a proposal we would recommend and, on that basis, we needed to consider a range of related factors. Those factors included the proposed structure, future growth prospects, risk profile and the long-term value of the new company, as well as the price offered to shareholders and the likely market trading price of the new securities.
“After serious consideration of all of these matters the majority of directors have formed the view that the proposal would introduce an unacceptable increase in risk which would most likely impact the long-term value and prospects of the company in the future.”
One area of concern was the significant increase in the level of debt within the CPPIB proposal, Auckland Airport said. This would have seen the company’s debt move from NZ$911 million as at 30 June 2007 to NZ$2.6 billion within a five-year period.
In addition, the terms of the new securities and the debt financing proposed by CPPIB would have reduced the company’s financial flexibility and imposed stringent “ring-fencing” requirements limiting the company’s ability to grow its business in line with its strategic plan, it claimed.
“The majority of directors have formed the view that the proposal would introduce an unacceptable increase in risk which would most likely impact the long-term value and prospects of the company“ |
JOHN MAASLAND CHAIRMAN, AUCKLAND AIRPORT |
“Standard & Poor’s has confirmed that the increased level of debt and these factors would have seen the company’s credit rating downgraded upon the proposal being implemented from A to BBB- which is at the bottom end of the investment grade rating.
“Finally, as we have said previously, the Board would have preferred a proposal that not only offered current and future value for shareholders, but also introduced additional expertise that would enhance the airport company’s plans for growth and development.”
Auckland Airport said that while CPPIB would have been a committed long-term investor, the organization was clearly not able to bring industry or tourism experience, “which makes them a less attractive option when compared with the DAE [Dubai Aerospace Enterprise – Ed] proposal which the Board unanimously recommended in the absence of a superior proposal.”
THE MOODIE REPORT DIGITAL PRINT EDITION: The failed DAE bid for Auckland Airport is analysed in the latest issue of The Moodie Report Digital Print Edition. Click here to download.
MORE STORIES ON AUCKLAND AIRPORT
Auckland Airport steps up Arrivals expansion with “˜uniquely Kiwi’ experience – 28/10/07
CPP Investment Board confirms plans to bid for minority stake in Auckland Airport – 19/09/07
Dubai Aerospace Enterprise bid for Auckland International Airport Ltd called off – 06/09/07
