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© Reuters. File photo: On October 25, 2017, passengers brought their luggage to the boarding gate of Sydney International Airport in Australia. The photo was taken on October 25, 2017. REUTERS/Steven Saphore
Authors: Jamie Freed and Scott Murdoch
SYDNEY (Reuters)-Sydney Airport Holdings Limited said on Monday that a consortium of infrastructure investors proposed to acquire the operator of Australia’s largest airport for 22.26 billion Australian dollars ($16.7 billion) in cash, raising its stock price by 38%.
If successful, this will be Australia’s largest such transaction this year, surpassing the $8.1 billion spin-off of Endeavor Group Ltd and Star Entertainment Group Ltd’s $7.3 billion acquisition of Crown Resorts Ltd.
A consortium of IFM Investors, pension fund QSuper and global infrastructure partners-known as the Sydney Air Alliance-offered a price of 8.25 Australian dollars per Sydney Airport stock, a 42% premium to the stock’s closing price on Friday.
On Monday morning, its stock price once reached 8.04 Australian dollars, but then fell back to around 7.68 Australian dollars.
Sydney Airport pointed out that the offer was lower than the stock price before the pandemic and said it was reviewing the proposal, depending on whether due diligence was allowed and recommended to shareholders in the absence of a higher offer.
Before the pandemic caused travel demand to collapse, the airport operator’s share price hit a record high of A$8.86 in January last year.
The company is Australia’s only listed airport operator. A successful transaction will align its ownership with other major airports in the country, which are owned by a consortium of infrastructure investors (mainly pension funds) with long-term investment prospects.
According to data from the Australian Pension Funds Association, Australia’s mandatory retirement savings system, or pension, has assets of 3.1 trillion Australian dollars.
As interest rates are at historically low levels, the fund is seeking infrastructure investments to obtain higher returns.
The proposal comes at a time when it is widely expected that Australia’s international borders will remain closed until at least the end of this year, partly because the new coronavirus vaccination program is slower than most developed countries.
During the usually busy school holidays, following the outbreak of the highly contagious COVID-19 Delta variant, Sydney was under a two-week lockdown and domestic travel was also severely disrupted. Other states have closed their borders to Sydney residents.
In May, international passenger traffic at Sydney Airport fell by more than 93% compared to the same month in 2019, while domestic passenger traffic fell by 39.2%.
The airport has long monopolized traffic to and from Australia’s most populous city, but with the opening of Western Sydney Airport, this monopoly will end in 2026.
The Sydney Air Alliance stated that it does not expect any substantial changes to the airport’s management, services, operations or target credit ratings.
The consortium stated that its members represent more than 6 million Australians to invest directly or indirectly, and the total amount of infrastructure funds under global management exceeds 177 billion Australian dollars, including shares in 20 airports.
IFM holds shares in major Australian airports such as Melbourne, Brisbane, Perth and Adelaide. QSuper owns shares in London Heathrow Airport, and Global Infrastructure invests in London’s Gatwick Airport and City Airport.
Their proposal is dependent on UniSuper, the largest shareholder of the airport with a 15% stake, agreeing to reinvest its stake in the same stake in the consortium’s vehicles.
The Sydney Airlines Alliance said: “This will help maximize the participation of Australian pension funds in the continued ownership of Sydney Airport.”
UniSuper also holds shares in Adelaide and Brisbane Airport, but did not respond to requests for comment.
Sydney Airport said it has hired Barrenjoy and UBS as financial advisers.
New Zealand Auckland International Airport Co., Ltd. is the only listed airport operator in Australasia, and its stock price rose by nearly 6% on Monday morning.
($1 = 1.3294 Australian dollars)
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