Council fast-tracks airport share deal

By GEOFF SENESCALL

The Auckland City Council is fast-tracking a decision on whether to sell its 25.8 per cent stake in Auckland International Airport, worth at least $260 million at today's prices.

A determination had been deferred until May this year, but a resolution was passed by the council several weeks ago to decide this month on what it would do with the holding. Additionally, the council has taken the further step in moving, after months of procrastination, that the decision be final.

The next council meeting is scheduled for March 9. The rationale for speeding up the process is that the council can construct its strategic and annual plans, which are likely to include considerable infrastructure spending.

The Auckland City Council has also been under pressure after North Shore City went ahead and sold its 7.1 per cent shareholding to Singapore's Changi Airport.

Although the Auckland council's stake is still strategic, the sale to a powerful buyer like Changi might deter other bidders and reduce the chance of receiving a premium for its block of shares.

Eastern Bays councillor Gray Bartlett, a keen advocate for the shares to be sold, is confident.

In October, the council voted 12-7 in favour of retaining the shares.

"I wouldn't say there will be a complete turnaround, but we should get in by a couple of votes," Mr Bartlett said.

"Everyone has their own personal opinion about what they don't want to happen with the proceeds of the sale and what they do want to happen." Some want the money to be used for debt reduction. Others want it to be used for capital projects, such as an indoor arena, and various infrastructure projects," Mr Bartlett said.

They would vote for anything that allayed the likelihood of a rates increase, he said. "That is why I am sure we will get the numbers. My thoughts are the majority of councillors, when push comes to shove, will take a reasoned view on the thing and realise we just can't keep on raising rates."

Deputy Mayor Dr Bruce Hucker, who is against the sale, was also picking it to be close. "There is still a potential majority against that. There will be quite extensive debate and extensive lobbying."

Dr Hucker said that City Vision, with eight of the 20 votes on the council, would oppose the sale.

Auckland Airport's share price closed down 1c at 240c yesterday. That is 50c less than the price North Shore City got for its stake, equating to $54 million for the Auckland council. It is likely that had the Auckland council combined its holding with North Shore a higher price than 290c a share would have been achieved.

According to analysts, the recent slide in the airport's share price has little to do with its financial performance. While rising interest rates are a negative, the continuing strong growth in tourism numbers means brokers are still recommending the airport as a buy.

Like other traditional stocks, the airport is suffering from a reallocation of investor funds into high-tech stocks.

Analysts also pointed to a possible drag on sentiment after the failure of Bejing Airport to achieve its listing price when it was floated this year.