DAE bids $2b for majority stake in Auckland airport

DUBAI — The Dubai-headquartered global aerospace manufacturing services corporation, Dubai Aerospace Enterprise (DAE), has made another step to becoming a major international player in the industry with its bid to take over Auckland International Airport Limited (AIAL) for NZ$2.6 billion ($2.08 billion).

By Jose Franco

Published: Tue 24 Jul 2007, 9:13 AM

Last updated: Sat 4 Apr 2015, 10:22 PM

State-backed DAE yesterday announced that the directors of AIAL have "unanimously recommended" the proposed transaction in which DAE would buy between 51 per cent to 60 per cent of the New Zealand firm, valued at NZ$5.6 billion ($4.4 billion), to create a new company called Auckland Airport Limited.

In a statement, DAE said AIAL shareholders would be asked to vote on the proposal at a meeting in November. It also said that under the merger implementation agreement, the AIAL board could consider other proposals from other parties.

"In these circumstances, the board has the ability to terminate the Merger Implementation Agreement after consultation with DAE," it said.

Bob Johnson, CEO of DAE, described the proposed transaction as a "significant development" that would benefit both parties.

"Auckland Airport Limited will be a cornerstone investment for DAE and as such, will receive our considerable support to continue to successfully develop the business on the global stage," he said.

The deal, which would allow shareholders to receive up to NZ$3.80 per share, a premium of 55.9 per cent to the average trading price over the month to May 5 (when takeover speculation began), has gathered mixed reactions hours after its announcement, with some Dubai analysts welcoming it and some New Zealand political parties and Auckland local governments criticising it.

Mansoor Mohammed Taher, general manager, Air Traffic Services, Dubai Department of Civil Aviation, said he was not aware of the announcement but added the deal would be good for the fast growing economy of Dubai.

"I don't know about that yet but if it is true, then it's good for the reputation of Dubai as a regional and international hub for business and air travel," he said. "It would be good for Dubai including the business community and the stock market."

But Taher said he thinks that some quarters in New Zealand would try to block the deal. "I think it would be opposed," he added. "Well, nothing is over until the final deal is done and, I think, the parties would continue talking to each other."

The German news agency, dpa, reported from Wellington, quoting critics as saying the deal would not succeed without a fight to keep AIAL in local hands. It said that New Zealand Foreign Minister Winston Peters, also leader of the nationalist New Zealand First Party, slammed the proposal because of the need to uphold national security.

"This is a very strategic asset and why would we want to give it to foreign ownership," it quoted Peters as saying.

dpa also said that the Green Party, which supports the centre-left coalition government, issued a statement asking if how a foreign corporation would use Auckland's international airport, the main gateway for 2.4 million people who visit New Zealand every year. "Will it be used to advance the interests of the tourist industry nationally or as a cash cow adding to our current account deficit as profits are repatriated overseas? dpa quoted from the Greens' statement.

It said NZ Prime Minister Helen Clark dismissed security concerns saying that privatisation always provokes debate. The mayor of Auckland City, Dick Hubbard, told a local paper that he had no opposition about selling AIAL to an Arab entity. Auckland's residents hold the biggest single stake at AIAL with 12.73 per cent.

John Maasland, chairman of the board of AIAL, said that DAE would help develop further the tourism industry in New Zealand. "This partnership should deliver significant benefits to the company and New Zealand tourism as a whole," he said.

DAE said the base proposal is to give shareholders NZ$2.34 cash per share, a new stapled security (share plus loan note) in Auckland Airport Limited, plus a final fully imputed dividend from AIAL of NZ$0.07 per share. A stapled security is where investors own two or more securities which are generally related and bound together through one vehicle.

Maasland said that the recent months had seen a tremendous increase in interest in AIAL from various quarters including infrastructure and pension funds.

"This level of interest is not surprising, given that Auckland International Airport is the only stand-alone listed asset of its kind in Australasia and is widely recognised as a well-managed and highly efficient operation," he said.

Speculation about the takeover became public when the Canada Pension Plan Investment Board offered the Auckland and Manukau city councils — the biggest single shareholders — NZ$3.10 a share for their total 22.27 per cent holding. The councils had been reported to be considering selling their shares citing lower-than-expected returns.

DAE said: "To conclude a transaction both AIAL and DAE require confirmation of at least a BBB-/Stable credit rating from Standard and Poor's and confirmation from the independent expert that the transaction is fair and reasonable."

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