KEY POINTS:
Auckland's two largest cities are committed to keeping their stakes in Auckland airport and will have to consult ratepayers before considering an offer which would net them more than $860 million.
Manukau Mayor Sir Barry Curtis and Auckland City finance chairman Vern Walsh said yesterday their councils regarded
the shares as a strategic asset. They were responding to approaches by the Canadian Government's mega-pension fund to buy their airport holdings for $3.10 a share before a possible takeover bid. Sir Barry said Manukau had received an offer on Monday from another party but would not give more details.
Together, the two councils own 22.8 per cent of the airport company. Auckland City has 12.75 per cent, worth $483 million at $3.10 a share. Manukau's 10.05 per cent is worth $380.5 million.
Waitakere, North Shore and Franklin councils sold their shares years ago at a fraction of today's value. Auckland City sold half its shareholding in 2002 for $190 million.
"The policy of the council is that the Auckland airport shareholding is a strategic asset and council policy is we will be holding that asset," Mr Walsh said.
Sir Barry said: "We have a resolved position, which determines that the Manukau City Council is a long-term holder of the 122 million shares in the airport."
They said before their councils could consider a firm offer they would have to consult their communities under special procedures in the Local Government Act. This could cause a political furore over privatisation in the lead-up to October's local body elections.
The City Vision-Labour ticket on Auckland City campaigned at the 2004 elections to "stop privatisation" and keep the airport shares.
Sir Barry said he was proud Manukau had built up a $400 million stake in the airport company, which had returned $108 million to the council since 1998. Auckland City has earned $121.3 million in dividends over the same period.
"It's my belief that the airport holding is a strategic holding and an excellent investment for Manukau City Council.
"I have a philosophical belief in public ownership of regional infrastructure assets and a strong belief of ownership of these shares for present and future generations of Manukau people," Sir Barry said.
Manukau mayoral candidate Len Brown said it was essential for the council to keep its shares, saying the airport company was a strategic asset for the city, employed local people and had significant commercial potential that would see the value of the shares climb.
Herald business commentator Brian Gaynor told National Radio that Sir Barry had been a staunch supporter of the airport and the council would be the last to sell.
Furthermore, Manukau had increased its shareholding above 10 per cent and could block anyone from reaching the 90 per cent trigger point to move to compulsory acquisition for 100 per cent control.
Mr Gaynor also said Auckland City had given away more than $300 million by selling half its shareholding in 2002 for $190 million.
John Banks, who was mayor of Auckland City at the time of the sale, said he sold the shares to meet an election promise of reducing council debt to zero and holding rates to the level of inflation. He said the latest offer was "extraordinarily attractive" but feared a sale by this council would be wasted on poor-quality spending.
Auckland and Manukau councils have been looking at getting more bang for their buck from their airport shares without having to part with them.
One idea was to sell the dividend streams and imputation tax credits by issuing redeemable preference shares. This could earn the councils more if they could unlock the value in the shares' imputation credits. They have asked Inland Revenue to make a binding ruling for such a transaction.
Airport: who sold what, when
* In July 1998, the National Government sold 51.6 per cent of Auckland Airport in a public float for $1.80 a share.
* Local councils were given the remaining 49.4 per cent.
* Waitakere City Council sold its 3.7 per cent stake in 1998 for $36.7 million. Those share are worth $140 million today.
* North Shore City Council sold its 7.1 per cent stake in 1999 for $87 million. Those shares are worth $270 million today.
* Franklin District Council sold its 1.17 per cent stake in 1999 for $14.8 million. Those shares are worth $44.3 million today.
* Auckland City Council sold half its shareholding in December 2002 for $190.8 million. Those shares are worth $483 million today.
* Auckland City's remaining 12.75 per cent is worth $483 million.
* Manukau City Council has increased its original stake of 9.64 per cent to 10.05 per cent, worth $380.5 million.
