KEY POINTS:
Auckland International Airport has ended partial takeover talks with the Canada Pension Plan Investment Board (CPPIB).
The airport's board said a proposal for CPPIB to acquire a significant interest in Auckland Airport was not "in the best interests of shareholders or the company" and could not recommend it.
Auckland Airport shares plunged 21c or 6.8 per cent to $2.87 in mid-afternoon trading.
Chairman John Maasland said the plan would have introduced "an unacceptable increase in risk" which would have probably affected the long-term value and prospectus of the company.
One dissenting director, Michael Smith, did believe in the proposal and felt it should have been put to shareholders with a positive recommendation.
The deal would have created a newly listed airport company, which would have given CPPIB between 39 per cent and 49 per cent of the new entity.
Existing Auckland Airport shareholders would have retained between 51 per cent and 61 per cent of the new company.
The AIA board said it considered several factors including the proposed structure, future growth prospects, risk profile and long-term value of the new company.
It also weighed up the price offered to shareholders and the likely market trading price of the new securities.
An area of concern was the significant increase in debt levels from $911m in June this year to $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," Mr Maasland said.
He said Standard & Poor's had confirmed the higher debt levels would have sent the company's credit rating down from A to BBB-. 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," Mr Maasland said.
Some commentators believe a previous withdrawn bid by Dubai Aerospace would have injected the expertise and capital necessary for the airport to expand.
Mr Maasland went further to say that while CPPIB would "no doubt have been a committed long-term investor, they are clearly not able to bring industry or tourism experience - which makes them a less attractive option when compared with the DAE proposal".
The board recommended the Dubai proposal but hit political and public resistance to the idea. Some feared it would be delisted, depriving investors of exposure to a top performing company, while others worried about it leaving New Zealand hands.
Auckland Airport's annual meeting will be held on November 20.
Director Joan Withers will retire by rotation and stand for re-election. Michael Smith had already indicated he would retire at the annual meeting.
- NZPA
