KEY POINTS:
The directors of Auckland International Airport (AIA) have advised shareholders to reject a partial takeover bid by the Canada Pension Plan Investment Board (CPPIB).
CPPIB is offering $3.6555 per share for 39.53 per cent of the airport, which would lift its stake to 40 per cent.
Chairman Tony Frankham today said directors unanimously recommended that shareholders vote to object to CPPIB getting 40 per cent of the company and to hold onto their Auckland Airport shares.
"We do not believe the offer fully reflects the value of Auckland Airport," he said.
"Nor do we believe that the introduction of CPPIB as a cornerstone shareholder would assist the company in any material manner."
Despite that, an independent adviser report provided by Grant Samuel concluded that the price being offered by CPPIB was above the airport's valuation range of $3.07 to $3.48 a share.
"While we respect the work carried out by Grant Samuel, the board considers that there are more growth opportunities and value upside in this strategic asset," Mr Frankham said.
If the offer succeeded, acceptances would most likely be scaled. As a result the overall value of accepting the offer would be less than $3.6555 per share.
"While the takeover offer has some attractive aspects, on balance, the partial nature of the offer gives shareholders no certainty on the total value they will receive from the takeover," he said.
The board was optimistic about the value of AIA, particularly the way in which it was positioned to benefit from growth in aviation in this part of the world.
A report sent to shareholders with a target company statement demonstrated the potential growth in the Australasian aviation sector, Mr Frankham said.
The board expected AIA to benefit from that growth.
It did see benefit in a synergistic relationship with a partner who would bring additional airport expertise or tourism opportunities to complement the existing management team.
"We anticipate this partner would have global connections and relationships to further enhance the business of Auckland Airport," he said.
"While CPPIB would be a committed investor, the board is concerned that they bring little in the way of direct airport experience and, as a passive investment fund, have limited scope to directly contribute to Auckland Airport's growth strategy beyond its current business plan."
The board also had serious doubts about whether an amalgamation proposal outlined by the Canadians could succeed, and was previously concerned by the high debt levels of that proposal, Mr Frankham said.
He urged shareholders not to accept a near term gain that may close the door on achieving a restructuring.
"By accepting this partial offer shareholders will have lost any future opportunity to benefit from the introduction of an industry partner," he said.
The directors believed that, on balance, the partial CPPIB offer was not in the best interests of shareholders when considered on a long-term basis.
But if it turned out that most shareholders did want to sell to CPPIB, and the takeover became inevitable, then directors would let all shareholders know so that they could decide to sell some shares too, Mr Frankham said.
If the offer failed the board would start a process seeking to identify a cornerstone investor with the attributes to deliver value for all shareholders.
AIA shares closed at $2.80 on Friday, having ranged between $2.14 and $3.50 in the past year.
- NZPA
