The Canada Pension Plan Investment Board has sweetened its bid for Auckland International Airport by reducing the amount of debt that will be involved in the transaction.
CPPIB plans to increase the number of ordinary shares offered as part of the deal and to reduce the convertible note
component of the offer.
The change comes in response to concerns some shareholders have voiced about debt levels involved in the transaction.
"We've heard feedback from the market and believe this change will enhance the proposed amalgamation," said CPPIB spokesperson Coran Lill.
CPPIB has proposed a two-part investment proposal which would ultimately merge the airport with a shell company and take on more debt to unlock higher cash returns for shareholders.
A takeover vehicle called NZ Airports would merge with AIA and shareholders would receive a stapled security of shares plus a convertible note. The revised offer of stapled securities, which will be launched tomorrow, will consist of an ordinary share valued at 70.55c and a convertible note valued at $2.75.
That will see the convertible note component reduced by 18 per cent to $3.4 billion, and shares would increase more than six times to $862 million. All other terms of the proposed amalgamation would remain unchanged.
The offer also has a cash component which values the company at $3.6555 per share.
While the change might allay the concerns of some investors it was not material to the value of the offer, said Simon Botherway of Brook Asset Management - which holds airport shares.
"It will probably be a little bit less tax efficient but it may satisfy some shareholders."
Brook had never been concerned by the convertible note component of the deal, he said.
Those sort of instruments were common in Australia and common in the UK, particularly for infrastructure investments.
Shares in Auckland Airport closed up 3c yesterday at $2.82.
