Sydney Airport rejects improved $16.8b buyout bid from group of infra investors

Photo: Soheb Zaidi/ Unsplash

 Sydney Airport Holdings Pty Ltd on Monday rejected an improved bid from a group of infrastructure investors worth A$22.80 billion ($16.81 billion), saying that it undervalued the airport operator, but that it was open to a higher offer.

The new offer valued Sydney Airport at A$8.45 per share, 2.4% higher than the previous offer of A$8.25 a share, and a more than 9% premium to the stock’s Friday close.

Shares were 1.4% lower in early trade on Monday, with the increased price below market expectations of closer to A$9 a share.

A successful takeover would be among the largest buyouts ever of an Australian firm and underline a year of stellar deal activity, that has already seen a mega $29 billion buyout of Afterpay by Square.

The unanimous board rejection comes a month after the airport operator turned down an initial bid from the Sydney Aviation Alliance (SAA), a consortium of Australian investors IFM Investors and QSuper and U.S.-based Global Infrastructure Partners.

Record-low interest rates have prompted pension funds and their investment managers to chase higher yields.

Australia’s largest pension fund, AustralianSuper, has joined the consortium, Sydney Airport said, in a move that could make it tougher for a rival offer to emerge given the requirement for 51% Australian control of the airport.

UniSuper, Sydney Airport‘s biggest shareholder with a 15.3% stake, has indicated it is open to rolling that equity into an investment in the privatised company, as required as part of the bid conditions.

Sydney Airport said its board was open to engaging with the Sydney Aviation Alliance if the consortium lifts its indicative price “to appropriately recognise long term value for Sydney Airport securityholders.”

Credit Suisse analyst Paul Butler said in a note that the low increase to the proposal price was “surprising”.

“The bidders either don’t see value at A$9 per share or think there is no urgency to get a deal done,” he said.

Now that AustralianSuper is part of the consortium, foreign ownership and airport cross-ownership restrictions limit the potential of a competing bid, he added.

Sydney Airport is Australia’s only listed airport operator and a purchase would be a long-term bet on the travel sector which has been battered by the pandemic.

Australia’s international border remains closed and Sydney is in its eighth week of lockdown after an outbreak of the Delta variant of COVID-19.

Nevertheless, analysts and investors believe there is scope for a higher price given the strong long-term outlook for the airport operator.

Macquarie’s analysts said that given the high value of the property within Sydney Airport and low interest rates, a valuation of A$8.75 was obtainable.

Sydney Airport …is holding an olive branch indicating that it is prepared to engage at the right price,” Macquarie said in a note to clients. “There is no statement to indicate this is SAA’s best and final, thus the butterfly dance continues.”

SAA and AustralianSuper did not respond immediately to requests for comment. Sydney Airport is due to report its first-half financial results on Friday.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.