Infratil did absolutely nothing to hide the reality of AustralianSuper's offer: hostile.
Already the attempt to take control of the infrastructure investment vehicle is shaping up to be an epic battle, with a state-owned asset manager, ACC, publicly pressuring Infratil to sit down with the Australians, even before the board had a chance to respond publicly.
ACC has been quite the activist investor lately causing bovver at Syft, where a tit-for-tat power struggle saw Doug Hastie ousted - https://t.co/q3JPB0Y1Hm) and challleninging Morrison's management fee setup at Infratil ahead of the AusSuper offer (https://t.co/T2CLdQqWDN)— Chris Keall (@ChrisKeall) December 9, 2020
On Tuesday evening, Australia's largest super fund announced to the world that it had made a bid to buy the Wellington-based fund, which owns everything from a majority stake in the capital's airport, to data centres in Australia, to Vodafone in New Zealand and - crucially - a large and growing business in renewable energy development.
By Wednesday morning, Infratil, run since its establishment by investment bank Morrison & Co, confirmed not only the approach but also the nature of it.
"The Board of Infratil Limited has become aware that AustralianSuper ... has publicly announced its interest in acquiring 100 per cent of IFT."
If the language seems mild it is not.
Infratil is making clear what was already obvious: that talks between the two sides are in such a poor state that AustralianSuper has gone directly to its shareholders, virtually inviting them to disregard the advice of Infratil's directors.
As if he knew to jump the gun, one of New Zealand's most influential fund managers has already sided with the Australians.
The decision by Blair Cooper, ACC's head of equities, to immediately speak publicly in support of AustralianSuper's bid, further brings to light what has appeared to be long-running unhappiness at the state-backed fund about Infratil's structure.
Cooper did not even wait for Infratil's response to the offer to pressure the company to sit down with AustralianSuper.
Earlier this year, ACC clashed with Infratil over Morrison & Co's management fees.
Given how rarely ACC speaks publicly, the deliberateness of Cooper's intervention cannot be overstated.
'Incomplete ... and confidential'
When Infratil's statement did come, it hit back at AustralianSuper, hard, describing the initial approach in October as "non-binding, incomplete, indicative and confidential", initially pitched at about $6.40.
Then a little over a month ago a revised offer was made, worth approximately $7.43 a share, prompting Infratil to form subcommittees to assess the bid.
The structure of Infratil (Morrison & Co earns a handsome management fee for running it) means the company publicly acknowledges that the interests of the shareholders and the managers can come into conflict, making assessing a takeover offer more complicated than it would be for an ordinary company.
But the offer was unanimously rejected by the board "as materially undervaluing [Infratil's] high quality and unique portfolio of assets on a control basis".
Infratil went on to imply that perhaps AustralianSuper might not know what it was getting itself in for.
"The board also notes material conditions related to Foreign Investment Review Board and Overseas Investment Office approvals in Australia and New Zealand," Infratil noted.
We do not know how the Government would look at such a takeover offer but can assume that seeing as Attorney General David Parker specifically mentioned airports when he announced emergency Covid-related changes to the Overseas Investment Act, that it might not be smooth sailing.
It also pointed out that Infratil controls TrustPower through its majority ownership, and that distributing its shares overlooks any control premium which shareholders in Infratil might expect to enjoy from a transaction.
With hindsight, the fact that AustralianSuper has come knocking should not be a surprise.
On Monday, Infratil revealed that it has had approaches for its majority stake in Tilt Renewables, the windfarm business which was spun out of Trustpower in 2016, and so therefore it was conducting a strategic review about whether to sell it.
Given the interest in renewable assets generally this year, the approaches are almost certainly real, but the announcement was always going to send Infratil's share price higher, making AustralianSuper's offer look less attractive.
It not only sent Tilt's shares up more than 20 per cent in two days, it hiked the value of Infratil, as its stake in Tilt rose in value by more than $200 million.
Whether the deal with AustralianSuper will succeed will come down to the views of institutional investors.
ACC (which owns 6.9 per cent) seems to want to make a deal, while Fisher Funds (5 per cent) has indicated the deal is not enough (but it does want to hear more).
Renewable development assets have been demanding extremely high valuations in 2020. Infratil may hope that investors take the lead from its failed attempt to takeover 100 per cent of Tilt with Mercury around two years ago.
In late 2018, Infratil and Mercury offered to pay $2.40 for the shares in Tilt they did not already own. The independent directors of Tilt rejected the offer as too low and the deal fell over.
Since then, Tilt has not only returned a pile of cash to its investors, its shares were worth $3.92 (a gain of around 63 per cent in two years) even before Infratil announced it was considering selling its stake.
At today's price ($5.20 at time of writing), Tilt's shares are well over double what Infratil said they were worth in 2018.
Early signs bad, but maybe there's more
Infratil's shares immediately leapt to be close to the AustralianSuper offer at $7.35, but have since been gradually easing, to $7.12 just after midday.
On the face of it, that suggests the deal will not succeed.
One fund manager expected there to be another strand which had not yet appeared in the Australian's interest.
"If it's just 'offer a 20 per cent premium, and it's a sort of hybrid offer, with some OIO (Overseas Investment Office) uncertainty', you do sort of wonder why you'd do that, because the advice they ought to have got is 'that's not really going to fly'."