- IFM, QSuper, Global Infrastructure Partners behind the offer
- Spot offer with a 42% premium over the last Friday closing price
- Offer conditional on reinvestment by UniSuper of 15% of the capital
SYDNEY, July 5 (Reuters) – A group of infrastructure investors have proposed one of the largest takeovers ever in Australia, a Australian $ 22.26 billion ($ 16.7 billion) purchase from Sydney Airport Holdings Pty Ltd, taking a longer-term view of the travel industry pandemic.
The proposal comes as record interest rates prompt pension funds and their investment managers to seek higher returns. The purchase, with an enterprise value of A $ 30 billion including debt, would see them reap financial rewards when borders reopen and travel demand rebounds.
If successful, the purchase of Australia’s largest airport would be one of the country’s largest in terms of enterprise value in US dollar terms, tied with the $ 22 billion purchase of l shopping center operator Westfield Group by Unibail-Rodamco in 2017, according to data from Refinitiv.
It would also rank eighth in the world this year and the second airport purchase, behind the $ 30.2 billion buyout of UK Heathrow Airport in 2006.
The Sydney Aviation Alliance – a consortium comprising IFM Investors, QSuper and Global Infrastructure Partners – has offered A $ 8.25 per Sydney Airport share (SYD.AX), a premium of 42% over the close of the action Friday.
The news pushed the stock up 38% to A $ 8.04 at the start of Monday’s session, though it then fell to around A $ 7.55, indicating market uncertainty over success. of the agreement.
Sydney Airport noted that the offer was lower than its share price before the pandemic and said it would review the proposal, which is conditional on it being granted due diligence and its recommendation to shareholders in the absence of a superior offer.
The airport operator’s share price hit a record A $ 8.86 in January last year, before the novel coronavirus pandemic caused a collapse in travel demand.
SEEK HIGHER RETURNS
The company is the only listed airport operator in Australia. A successful deal would bring its ownership closer to the country’s other major airports that are owned by consortia of infrastructure investors, mostly pension funds.
Australia’s mandatory retirement savings system, known as the Superannuation Pension, has assets of A $ 3.1 trillion, according to the Association of Superannuation Funds of Australia.
With record interest rates, funds are seeking infrastructure investments for higher returns.
“Now is a good time to take a look at these assets which have a lifespan of 75 years when conditions are arguably at their lowest,” said a Sydney airport investor who declined to be named because the person’s company was still evaluating the proposal. “It’s opportunistic in this regard, but understandable.”
Australia’s international borders are expected to remain closed at least until the end of the year in part due to a slower vaccination schedule than in most developed countries. Read more
Domestic travel has also been disrupted by a two-week lockdown in Sydney during the normally busy school holiday period, following an outbreak of the highly contagious Delta variant of COVID-19. Other states have closed borders to residents of Sydney.
In May, Sydney Airport’s international traffic was down more than 93% from the same month of 2019, while domestic traffic was down 39.2%. Read more
The airport has long held a monopoly on traffic to and from Australia’s most populous city, but that is expected to end in 2026 with the opening of Western Sydney Airport.
Sydney Aviation Alliance said it does not plan to make any substantial changes to the airport’s management, services, operations or target credit ratings.
IFM has stakes in the main airports of Melbourne, Brisbane, Perth and Adelaide. QSuper has a stake in UK Heathrow Airport, while Global Infrastructure has an investment in Gatwick and London City airports.
Their offer is conditional on the acceptance by UniSuper, the largest shareholder of Sydney Airport with a 15% stake, to reinvest its stake for an equivalent stake in the consortium vehicle.
UniSuper, which also owns stakes in Adelaide and Brisbane airports, said it was not a partner in the consortium and was not aware of any details other than publicly disclosed information.
“UniSuper considers, however,, in principle, the benefit of converting Sydney Airport from a listed company to an unlisted company. UniSuper also has a favorable opinion of the consortium partners,” the fund said.
($ 1 = 1.3294 Australian dollar)
Reporting by Jamie Freed in Sydney and Scott Murdoch in Hong Kong; Additional reporting by Byron Kaye in Sydney and Nikhil Kurian Nainan and Soumyajit Saha in Bengaluru; Editing Stephen Coates and Christopher Cushing
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