KEY POINTS:
Dubai Aerospace's bid for Auckland International Airport may get a boost after revelations that Auckland and Manukau City Councils could increase their stakes in the airport without putting in extra cash if the merger succeeded.
"Based on some indicative numbers we've done, it could see Manukau go from
10 to 12 or 13 [per cent] and Auckland City Council going from 12.75 to as much as 15," Dubai Aerospace Enterprise (DAE) Airports chief financial officer Hamish De Run said yesterday.
Under the terms of the deal recommended by the Auckland Airport board on Monday, a base proposal would see shareholders receive $2.34 cash, a 7c dividend and a stapled security share in the new company valued at $1.39, taking the total value to $3.80.
That proposal would see the two councils effectively selling down half their holdings - something which has prompted political condemnation from Manukau Mayor Barry Curtis and New Zealand First leader Winston Peters.
But DAE has set aside a cash pool of $313 million to allow shareholders to take a higher proportion of cash if they prefer.
While there are no guarantees, most commentators expect this pool to be fully subscribed, which would see the councils increase their stakes.
Between them the councils own roughly 23 per cent. "If the cash pool was 'maxed out' and you assume the remaining 77 per cent wanted cash, there wouldn't be enough for all of them," De Run said.
That demand would effectively allow the councils to trade the $2.34 cash component for extra shares at $1.39. "So if you do the maths - $2.34 divided by $1.39 - you're getting an additional one share plus a fraction," De Run said.
"So if they're getting another one share plus a fraction they're going to end up going above their current holding by a significant amount."
Allocations for more cash or more scrip were on a pro rata basis and all shareholders would be treated equally, so there were no guarantees about the final allocations, De Run said.
But based on current market expectation it was reasonable to assume that outside of the councils, most shareholders would opt for cash.
Auckland City yesterday confirmed its officials were aware of the full range of proposals but it was also aware there were no guarantees on any options other than the base proposal, a spokesperson said.
A Manukau City spokesperson said staff would "brief councillors on what the proposal and its options would mean for the council and the council will, in time, make a decision on its course of action".
Flying High
* If the proposed Auckland Airport merger goes ahead and most shareholders opt for the maximum cash available:
* Auckland City Council could lift its stake from 12.75 per cent to 15 per cent.
* Manukau City Council could lift its stake from 10 per cent to 13 per cent. Bonus for councils in Dubai deal