Sydney Airport rejects improved US$17bil buyout bid

No deal: Travellers preparing to board a passenger aircraft at Sydney Airport. The airport operator is open to a higher offer from bidders. — Bloomberg

SYDNEY: Sydney Airport Holdings Pty Ltd has rejected an improved bid from a group of infrastructure investors worth A$22.80bil (US$16.81bil or RMRM71.2bil), 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 (RM26.37) per share, 2.4% higher than the previous offer of A$8.25 (RM25.73) a share, and a more than 9% premium to the stock’s Friday close.

Shares were 1.4% lower in early trade yesterday, with the increased price below market expectations of closer to A$9 (RM28) 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 US$29bil (RM122.96bil) 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, a consortium of Australian investors IFM Investors and QSuper and US-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 lthe 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 (RM28) 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. — Reuters

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