KEY POINTS:
Auckland International Airport chairman Tony Frankham went to considerable lengths to sound optimistic after the Government stopped a Canadian pension fund buying a 40 per cent stake in the airport. Directors, he said, would focus on moving the business forward. A big part of this would be a reconsideration of "the prospects for introducing a new cornerstone shareholder that could add strategic value".
A year ago, such an undertaking would have presented few problems. Suitors were circling the airport, attracted by its potential and an ownership vacuum. Now, however, circumstances are different. Indeed, the Government's handling of the Canadian bid effectively puts the airport out of bounds.
The Canadian Pension Plan Investment Board strove manfully to convince Wellington that its investment would benefit New Zealand. Friday's decision by two Cabinet ministers, Clayton Cosgrove and David Parker, suggested it had succeeded only in tying itself in knots. The Canadians must have felt, for example, that restricting their voting right to just 24.9 per cent of the airport's shares would enable them to meet the Government's new decree on the maintenance of New Zealand control of strategically important infrastructure. Certainly, the Overseas Investment Office (OIO) saw its point. It suggested the voting stipulation should be a condition of consent.
The two ministers would have nothing of this, however. Indeed, they used the Canadians' lack of voting clout to undermine other aspects of their case. How, they asked, could the pension fund guarantee that its investment would prompt more competition, efficiency, productivity and domestic services, as required by the Overseas Investment Act, if it was not clear its initiatives would be implemented? Such contortions suggest any overseas suitor viewed by the Government with even the slightest distaste will be banished.
The ministers even managed to satisfy themselves that their blocking manoeuvre would not harm New Zealand's image overseas. For this, they drew on the OIO's advice that other countries also had foreign investment restrictions. Those countries did not, however, impose strict new criteria in the middle of a sales process or, earlier in the process, take retrospective action to plug a tax loophole.
It is hard not to conclude that the airport board will now have to soldier on alone. Even before the ministers' decision, potential overseas investors were thinner on the ground because of the drying up of private equity funding. Others will have been dissuaded by the treatment meted out to the Canadians and, earlier, to Dubai Aerospace. Who would relish leaping through hoops and then be abruptly dismissed?
The past few months have not been totally fruitless, however. The thwarted suitors have introduced new ideas. Mr Frankham noted, for example, that the company's capital structure would be re-examined. He said that he was also confident the airport could continue to deliver sustainable growth in earnings. But that would be much accelerated under a strong cornerstone shareholder. Dubai Aerospace, more so than the Canadians, promised this, with its expertise and plans to develop airport services, expand aircraft servicing, enhance route development and promote tourism.
The Dubai bid also fell foul of xenophobia and decision-making that owed more to politicking than rational judgment. The verdict of Mr Cosgrove and Mr Parker comes from the same school. Airport shareholders will feel the immediate pain. All airport users will suffer the lasting consequences.
