KEY POINTS:
As the Auckland Airport board reviews its recommendation on the Canadian Pension Plan Investment Board offer, the momentum for the sale appears to be growing - at least among institutions.
Certainly the spike in shares over the past week would suggest there is renewed confidence in the market
that the bid can succeed. The shares have risen 30c to $2.83 since last Friday's close.
Typically in a takeover situation, the closer the shares get to the offer price the more confident the market is that it will succeed.
That's because if stock is trading below the price being offered for it, the difference represents a premium to those investors who are prepared to take a bet on the success of the offer. So as the shares rise it indicates more investors are prepared to take a punt on the offer's success.
But there are two components to this process. Because it is a partial bid - for a 40 per cent stake - shareholders must vote on whether it is allowed to proceed, as well as deciding whether to sell.
And with the vote comes the politicking and this is getting as murky as the battle between Hillary Clinton and Barack Obama.
Further evidence of growing momentum was revealed yesterday in the latest vote count. Of the 7.3 per cent of votes cast so far the split is now 57.62 against the sale and 42.38 in favour. That's a big swing from February 4 when of about 5 per cent of votes cast more than 76 per cent were against the sale.
After those numbers were released, the Canadians were quick to point out that most of the early votes were from clients of staunch sale opponents ABN Amro Craigs. Yesterday the "no" camp argued that the Canadians are now rallying enthusiastic institutions to get their voting papers in early for much the same effect - everyone wants to look like a winner.
So in other words both sides have now alleged that this "evidence of momentum" is being stage-managed.
The news - confirmed by Auckland Airport yesterday - that the board is reviewing its recommendation is no doubt adding to that renewed optimism in the Canadian camp.
The board stuck its collective neck out late last year to recommend emphatically that investors reject the bid.
So how serious is this review?
Those supporting the offer believe board members are wavering with some robust debate going on behind the scenes. But those opposed note the board always said it would assess the likely outcome and provide an updated recommendation - setting a deadline of March 6.
And while the deadline for the bid is actually March 13, that March 6 date is starting to look like D-Day for Auckland Airport. That's the date on which Auckland City Council plans to meet and decide whether to vote in favour of allowing the bid to proceed.
Despite the evidence of increased market support, it is the council shareholders - Auckland with 12.75 per cent and Manukau with 10.5 per cent - that can swing the sale or block it.
Both have ruled out selling shares. Manukau's opposition to the sale is so strong it seems unlikely they'll vote to let it proceed. So that leaves the spotlight on Auckland.
If they won't sell, will they vote to let others? If they let the deal proceed then they may benefit from CPPIB's restructuring proposal to unlock some capital value at a later date. But that plan relies on approval from the IRD and remains uncertain.
The immediate problem for Auckland City is that if they vote to allow the deal but don't sell into it then they effectively hand their share of the control premium to other investors. For intrigue and drama this deal is going to give the United States primaries a run for their money over the next three weeks.
* Liam Dann is editor of the Business Herald.
