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Auckland Airport advises against takeover offer

Auckland Airport advises shareholders to reject partial takeover

The board of Auckland Airport is advising its shareholders to reject the partial takeover offer from the Canada Pension Plan Investment Board (CPPIB) for $3.6555 per share.

The offer is for 39.53% of the Auckland Airport shares not already held by CPPIB.

Chairman of the board, Tony Frankham, said that directors unanimously recommended that shareholders vote to object to CPPIB getting 40% of the company and to hold onto their Auckland Airport shares.

"We do not believe the offer fully reflects the value of Auckland Airport.

Nor do we believe that the introduction of CPPIB as a cornerstone shareholder would assist the company in any material manner.

While the takeover offer has some attractive aspects, on balance, the partial nature of the offer gives shareholders no certainty on the total value they will receive from the takeover.” he said

Mr Frankham said the board is optimistic about the value of Auckland Airport, particularly the way in which it is positioned to benefit from growth in aviation in this part of the world.

“We have commissioned a report, sent to shareholders with the Target Company Statement, which demonstrates the potential growth in the Australasian aviation sector. The board expects Auckland Airport to benefit from that growth.

As we have previously indicated, we see benefit in establishing a synergistic relationship with a partner who would bring additional airport expertise or tourism opportunities to complement our existing excellent management team. We anticipate this partner would have global connections and relationships to further enhance the business of Auckland Airport.” he said

"While CPPIB would be a committed investor, the board is concerned that they bring little in the way of direct airport experience and, as a passive investment fund, have limited scope to directly contribute to Auckland Airport's growth strategy beyond its current business plan.

“The board has serious doubts about whether the amalgamation proposal outlined by the Canadians can succeed, and was previously concerned by the high debt levels of that proposal.”

Mr Frankham said that while the board recognised that shareholders had different investment objectives, he urged them not to accept a near term gain that may close the door on achieving a restructuring.

"By accepting this partial offer shareholders will have lost any future opportunity to benefit from the introduction of an industry partner.”

An independent adviser report provided by Grant Samuel concluded that the price being offered by CPPIB is above its valuation range of $3.07 - $3.48 per share.

"While we respect the work carried out by Grant Samuel, the board considers that there are more growth opportunities and value upside in this strategic asset.

If the offer succeeds, acceptances will most likely be scaled. As a result the overall value of accepting the offer will be less than $3.6555 per share.

The directors therefore believe that, on balance, the partial CPPIB offer is not in the best interests of shareholders when considered on a long term basis.

However, if it turns out that most Auckland Airport shareholders do want to sell to CPPIB, and the takeover becomes inevitable, then directors will let all shareholders know so that they can decide to sell some shares too," said Frankham.

A copy of the Target Company Statement is being sent to shareholders this week.

“It is important for shareholders to review this information carefully and consult with their own financial advisers before making any final decision.”

Mr Frankham said that following the failure of this takeover offer, the board will commence a process seeking to identify a cornerstone investor with the attributes to deliver value for all Auckland Airport shareholders


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