Airport share offer gets tick

Auckland International Airport. Photo / Supplied

Auckland International Airport's $126.4 million equity raising announced yesterday has won the thumbs up from the Shareholders Association for the way it allows even those retail investors who don't take part to benefit.

AIA said the cash raised in the one-for-16 pro rata entitlement offer would be used to repay a portion of the debt drawn down to pay for its $166.7 million acquisition of 24.55 per cent in Cairns and Mackay airports in Queensland which was announced two weeks ago.

The structure of the offer, which is fully underwritten by joint lead managers Credit Suisse Australia and First NZ Capital, while common in Australia, was a first in the New Zealand market, AIA chief financial officer Simon Robinson said.

Any entitlements not taken up in the institutional pro rata offer or the subsequent retail offer would be offered to other investors in two separate bookbuilds.

Any premium over the $1.65 exercise price achieved in the bookbuild would go the original holder of the entitlements.

"What this means is our joint lead managers will sell those entitlements on behalf of those shareholders," said Robinson.

The offer benefited Auckland Airport as it expedited the institutional part of the offer and it also helped shareholders who could not participate to capture the value of their entitlements without incurring brokerage charges which might otherwise eat into the value of the entitlements for holders of small stakes.

The Shareholders Association's Bruce Sheppard was not convinced of the wisdom of the Cairns and Mackay acquisition or the need to issue new equity to fund it, given the company's relatively strong balance sheet.

However, the structure of the offer was good even for the most unsophisticated retail investor.

"If you are stupid and you don't exercise your rights you at least get what the market for tradeable rights would have created or more. At the end of that process, all of those who did nothing get a share of the booty. It can't be fairer than that."

Auckland City Council has a 12.71 per cent stake in the airport and Manukau City Council has 10.01 per cent. Auckland City Council said it will finance the purchase of its entitlement through debt of about $16 million. Manukau said it will cost $12.66 million to maintain its stake. NZ Super fund, which has a 9.75 per cent stake, has not said if it will take up its entitlement.

Auckland Airport shares closed at $1.92 yesterday.