Singapore airports check out

By Geoff Senescall

The prospect of Auckland International Airport being put on the market is already attracting the attention of Changi Airports Authority of Singapore, which has appointed an investment bank to advise it.

Auckland City Council is expected to confirm the sale of its 25.8 per cent stake in the airport at next week's council meeting, putting the airport into play.

However, the intentions of other councils, who hold 17.6 per cent of the airport shares, will be crucial to getting the sale off the ground and extracting top dollar.

Brokers canvassed yesterday said that a trade buyer would only be interested in the airport, and pay up for the shares, if it was certain it could get 100 per cent.

That way, the buyer would not only have management control but it would also get access to cash flows, enabling it to leverage its entry price.

Without full control, a buyer would only get the dividend stream. Buying the Auckland council's stake would only provide an annual dividend stream of around $7.5 million a year against an investment of more than $300 million.

Last month the council hired brokers Merrill Lynch to assess the value of its holding. It valued the council's holding at $370 million, or around 340c a share.

But this price assumed that the buyer would get 100 per cent. If the Auckland council could not convince other councils to sell, then it might have to accept a price much closer to market.

Auckland airport shares yesterday closed up 1c at 281c. That is well up on 180c, the price at which the airport shares were sold in June last year when Merrill Lynch floated the Government's majority shareholding.

At the listing price, the airport was valued at $756 million against current market capitalisation of $1.18 billion.

If Merrill's takeover valuation was on the mark, then the airport could be valued at $1.4 billion, nearly double the listing valuation.

Other players likely to be interested in the airport will be those who bought airport shares in Australia's recent privatisation programme.

Included in this group are airport operators such as the British Airport Authority (in conjunction with AMP), Lockheed from the United States and Holland's Schiphol airport.

Locally, Infratil, with the added muscle of Lend Lease, is also likely to be a keen bidder. Singapore Government-controlled Changi, looking to expand its operations, pulled out of a deal last year to build a new airport in southern India.