Sydney Airport rejects $ 17 billion buyout proposal amid deals frenzy

SYDNEY, July 15 (Reuters) – Sydney Airport Holdings Pty Ltd (SYD.AX) on Thursday announced that it would reject an A $ 22.26 billion ($ 16.6 billion) takeover proposal from a group of infrastructure fund, the biggest of an Australian deal frenzy fueled by record interest rates.

The operator of Australia’s largest airport said directors unanimously concluded the proposal undervalues ​​the airport and is not in the best interests of shareholders. If successful, this would have been one of Australia’s biggest buyouts.

Record interest rates have prompted pension funds and their investment managers to seek higher yields, leading to recent asset purchases from Telstra Corp (TLS.AX) and Qube Holdings ( QUB.AX). Read more

Power pole and wire company Spark Infrastructure Group (SKI.AX) has rejected an A $ 4.91 billion takeover proposal from private equity firm KKR & Co Inc (KKR.N) and the Plan Council Ontario Teachers’ Pension Fund, but left open the possibility of some engagement.

Last week, the Sydney Aviation Alliance, a consortium of IFM Investors, QSuper and Global Infrastructure Partners, offered A $ 8.25 per share, for a 42% premium over the last Sydney Airport stock price. ravaged by the pandemic before the offer. Read more

Sydney Airport shares were flat at around A $ 7.80, a sign that the market is expecting further trading.

The proposal is subject to a recommendation from the board of directors and access to due diligence. Sydney Airport said its board would only accept a buyout deal that “offers and recognizes appropriate long-term value.”

“The board is obviously trying to play hard, but we think this is a fairly unique long-term asset, so we support their decision so far,” Andy Forster, portfolio manager at Argo Investments, l ‘one of the top 20 investors in the airport, told Reuters.

In a statement, the Sydney Aviation Alliance said it was “surprised and disappointed” by the rejection, but did not say whether it had ruled out a higher offer.

The Australian government has a 49% foreign ownership cap on airport operators. IFM, QSuper and UniSuper are Australian, while Global Infrastructure Partners is from the United States.

Sydney Airport is the only airport operator listed in Australia and a purchase would be a long term bet on the travel industry. The city’s lockdown will last at least two more weeks after an increase in COVID-19 infections. Read more

A successful deal would align its ownership with the country’s other major airports, which are owned by consortia of infrastructure investors, mostly pension funds.

Australia’s mandatory retirement savings scheme, known as the Superannuation Pension, has assets of A $ 3.1 trillion, according to the Association of Superannuation Funds of Australia.

A purchase of Sydney Airport with an enterprise value of A $ 30 billion, including debt, would allow it to reap financial rewards when the borders reopen.

If successful, the purchase would be one of Australia’s largest in terms of US dollar enterprise value, tied with the $ 22 billion purchase of shopping center operator Westfield Group by Unibail-Rodamco in 2017, according to data from Refinitiv.

This would require the approval of the Foreign Investment Review Board and the Australian competition regulator.

Cross-ownership rules could force IFM to sell part of its holdings at other major Australian airports, Morgan Stanley analyst Rob Koh said.

“There may be a series of other airport transactions following this,” Koh said at a CAPA Center for Aviation event on Wednesday, adding that the co-owners who likely have pre-emptive rights would be logical buyers.

Bloomberg News last week said that a consortium led by Macquarie Group (MQG.AX) was considering a competing offer, citing unidentified sources. With talks at an early stage, Macquarie could also consider joining the Sydney Aviation Alliance, he added. Read more

In a note, analysts at Credit Suisse said there was potential for other bidders, such as Macquarie, Australia Super and the Future Fund, to get involved. Macquarie once owned Sydney Airport and the others have stakes in other Australian airports.

($ 1 = AU $ 1.3407)

Reporting by Jamie Freed and Paulina Duran; Editing by Stephen Coates and Clarence Fernandez

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