Insight - An Airport More Richly Valued Than Amazon Shouldn’t Fly

Outstanding offer: Travellers at a domestic terminal in Sydney Airport. The airport operator is getting a generous offer and its current owners have years of sluggish demand, rising competition and political risk ahead of them if they turn it down. — Bloomberg

EVEN by the standards of Australia’s booming infrastructure sector — where toll road operators are routinely priced more richly than Tencent Holdings Ltd, and a couple of land-titles registries can be privatised for not much less than Britain’s postal service — the takeover fight around Sydney Airport stands out.

On Monday, the operator of the airport on the shores of Botany Bay rejected a sweetened offer from a consortium led by IFM Investors, which valued it at nearly A$31bil (US$22.8bil or RM96.62bil) including debt. The company said the offer price of A$8.45 (RM26.18) per security is “opportunistic in light of the Covid-19 pandemic.”

That’s pretty rich. Until just months before the coronavirus sent aviation stocks plummeting, Sydney Airport had never attained such a price. International aviation, which accounts for more than a third of passengers and has historically grown far faster than the stable domestic business, isn’t likely to return to normal until at least 2024. A separate airport is under construction on the western fringes of the city, and will start competing for passengers not much later, in 2026. Any buyer offering cash at this point is taking a great deal of uncertainty away from investors exposed to the vagaries of the 2020s aviation market.