Auckland Council Mayor Wayne Brown's deal to sell some of its stake in Auckland International Airport (CEO pictured right), has missed out on $29m. The deal was done by UBS investment bank this week. Photo / Herald montage
Auckland Council Mayor Wayne Brown's deal to sell some of its stake in Auckland International Airport (CEO pictured right), has missed out on $29m. The deal was done by UBS investment bank this week. Photo / Herald montage
ANALYSIS
Auckland Council’s drawn-out process to finally sell down its stake in Auckland International Airport (AIA) ultimately cost it $29.1 million.
The airport’s share price has declined 10.7 per cent since the council decided to sell its strategic stake on June 9, from $8.75 a share to $7.81at the market close last night.
On that day in June, the price the council expected to fetch for its 7 per cent stake was $865m.
But the sale executed by investment bank UBS this week instead fetched an $835.9m price tag, $29.1m less than hoped - and that was with bidders paying a premium of between 3.7 and 4.2 per cent.
An investment banker the Herald spoke to on Friday morning as the deal was revealed said it was a solid result for UBS given the circumstances (when it was revealed it was appointed to the deal, the airport’s price was $8.58), but it proved the council’s drag was costly.
Auckland Airport’s share price opened strong on Friday morning at $8.10, indicating there was overhang from the deal with investors still wanting to get in.
Harbour Asset Management director Shane Solly said that suggested UBS could have fetched a higher price, but higher bond yields were keeping a lid on the longer-term value of companies like the airport (explanation on that here if you’re interested).
The majority of analysts covering the stock were targeting a price above its current level. Just four out of 14 analysts had it priced lower.
The range was quite wide, varying from $6.50 from a bearish Craigs Investment Partners to a bullish Macquarie targeting $9.60.
While it’s not yet known who bought all the shares (only Harbour Asset Management has confirmed it participated so far), it was big money on the table and would have attracted pension funds here and abroad.
UBS sold the shares in three lots.
Two parcels went to market; one worth $90.9m (11.1 million shares at $8.15 each) and another worth $209.96m (25.8 million shares at $8.11 each).
A separate block trade overnight on Thursday, underwritten by UBS, was worth $535m with 66 million shares sold at a cheapest price of $8.10 each - a 3.7 per cent premium to the airport’s closing share price that night.
That’s where Harbour Asset bought in.
Auckland Airport was largely owned by international institutions, which may have looked to increase their stake. If that happened, we should see it in updated substantial shareholder notices posted to the NZX - we haven’t seen any beyond the council’s notice yet.
Auckland Council’s stake in the airport was the largest but will now be second largest, after HSBC, which held 23.6 per cent at the end of June, according to AIA’s annual report.
JP Morgan held 10.6 per cent, BNP Paribas held 7.8 per cent, and Citibank had around 4 per cent. Other shareholders included the Accident Compensation Corporation (ACC) and the New Zealand Superannuation Fund.
Auckland Airport’s chief executive Carrie Hurihanganui was doing the rounds of institutional investors this week following its stellar annual result.
Carrie Hurihanganui, chief executive of Auckland Airport. Photo / Supplied
Last month it reported a 1377 per cent increase in underlying profit to $148.1m in the year ended June, up from a loss of $11.6m the year before.
It was forecast to make an even larger underlying profit of between $260m and $280m this financial year, with plans to spend between $1 billion and $1.4b on capital expenditure to upgrade its infrastructure.
It did not mention Auckland Council once in its result release.
Hurihanganui’s focus was clearly elsewhere: “Attracting and retaining airline networks, which support tourism and trade, requires high quality, resilient and reliable airport infrastructure, with sufficient airfield and terminal capacity,” she said with the result on August 24.
The airport will likely need to raise capital to fund its infrastructure plans - something its new shareholders would have factored in when they bid for the stock this week.
Madison Reidy is the host of New Zealand’s only financial markets show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
