KEY POINTS:
A proposed takeover of Auckland Airport by Canada Pension Plan may be acceptable to Auckland City Council, but the people of Manukau City say they don't want a bar of any sale.
The Canada Pension Plan Investment Board (CPPIB) said yesterday that Auckland City Council played a big
role in persuading it to launch a new bid for Auckland Airport.
However, at a special meeting today, Manukau City Council has chosen to keep its shares in the airport - in the meantime.
The feedback from the community was overwhelmingly in favour of keeping its 10 percent share in Auckland's tourist gateway, Council staff reported. The council received 552 submissions when it asked the public for direction.
The council said it has so far not been presented with a formal offer from the The Canadian Pension Plan Investment Fund and the two are yet to enter into formal discussions.
Mayor Len Brown said the council should wait and see what is being offered.
Manukau mayor Len Brown has urged his council to take a conservative approach to the debate.
"Our community have overwhelmingly asked us to be prudent and conservative in our dealings," Mr Brown said.
At the meeting this morning, Mr Brown said the Manukau public were totally supportive of retaining its airport shares and limit foreign ownership.
"There's a very clear mandate from the community to hold our own airport share holdings long term," he said.
There's also a mandate to encourage investment in the airport by other parties for the benefit to increase revenue and grow the airport both in capacity and land holdings, he Mr Brown said.
CPPIB yesterday bypassed the Airport board - which last week rejected an initial proposal - to make a cash offer of $3.6555 per share for a 40 per cent stake in the company.
Since the board's rejection, CPPIB had been "lobbied by a number of the company's major shareholders," said CPPIB vice-president Mark Wiseman.
"Shareholders want to see our full proposal - it was given in full to the board but shareholders have only seen snippets."
Wiseman disputed the market view that this was a hostile bid.
"The reason we're in this position is because shareholders - including the largest, being Auckland Council - have, it would be an understatement to say, encouraged us to move forward."
CPPIB still plans to put an amalgamation proposal to AIA shareholders. It hopes to restructure the company in a way that will make more efficient use of capital - potentially returning value to shareholders while allowing them to retain their holdings.
Auckland City's general manager of finance Andrew McKenzie said the council had told the Canadians their rejection by the board was disappointing.
"What the airport needs now is some stability and most people would be happy to see an investor like the Canadians involved. We stand by the view that shareholders should have had the opportunity to have a look at it [the initial offer] but the board knocked it back," McKenzie said.
The council had since told CPPIB "it was disappointed in the way it was rejected - we would have liked the opportunity to consider what they were putting up".
The council's stake would be worth $560 million if the new offer was accepted, up from about $450 million in the days after the deal was rejected.
Lloyd Morrison - whose investment company Infratil now holds almost 8 per cent of airport shares in partnership with the NZ Superannuation Fund - yesterday questioned the value of the offer.
"Why would existing shareholders vote for somebody to get effective control without a contested process for control?" he asked. "I think there are plenty of parties that would like to buy control at higher prices than $3.66."
The bid was definitely hostile, he said.
"The definition of a hostile deal is a deal where they bypass the board to get a controlling interest in the company."
The board will still be expected to make a recommendation on the new cash offer - however the nature of that board may be different to the one that rebuffed the Canadians last week.
Director elections are scheduled for Auckland Airport's annual meeting on November 20.
Board member Joan Withers is up for re-election and Mike Smith resigned after last week's rejection of CPPIB's bid. Auckland City has nominated Richard Didsbury, Manukau City has nominated John Brabazon and Infratil chief Lloyd Morrison will also stand.
As a partial bid, the new offer is conditional on the approval of a majority of those AIA shareholders that respond. Ballot documents will go out to shareholders with the offer documents - which are expected to be ready within 10 days - just in time for the AGM.
Institutional shareholders yesterday expressed mixed feelings about the bid.
Simon Botherway of Brook Asset Management - which holds an undisclosed stake on behalf of the NZ Super Funds and other clients - said he wasn't surprised CPPIB had taken the extra step to try and get a deal in front of shareholders.
Botherway said his main concern was how the fund was going address the capital structure.
"There needs to be some sort of capital transaction and its hard to imagine how they are going to do that."
The issue of how an amalgamation proposal might work, given CPPIB will already be a 40 per cent shareholder prior to the transaction, was perplexing.
"The success or otherwise of this offer will hinge on what they have to say with respect to subsequent restructuring of Auckland Airport."
Frank Aldridge, chief executive of ABN Amro Craigs - which manages a holding equal to about 10 per cent of the airport - said he wasn't focused on the cash price and would expect to take a three- to five-year view.
* WHAT'S NEXT
CPPIB expects to have detailed offer documents ready for shareholders within 10 days.
The offer will include a cash bid for a 40 per cent stake and ballot papers as takeover rules require shareholders to vote to allow any partial offer to proceed. A majority of responses is required.
Shareholders will meet to vote on new directors at the AGM on November 20.
The offer will still be subject to an independent valuation and recommendation by the board.
