KEY POINTS:
Auckland Airport directors will look at a DIY approach to shaking up the company should the Canadian bid fail or be knocked back by the Government.
The board has been under siege since October 2006 from suitors it did not seek, but now looks increasingly likely to be left alone by foreign investors shy of New Zealand's "strategic assets" and the lightning speed rules change here.
Board chairman Tony Frankham says if the Canada Pension Plan Investment Board's bid fails at the approval stage - given the Government's stance he and others on both sides of the fence believe it will - the directors will "clear the decks" and get busy shaping the future of the airport.
Three of the six-member board are new, there have been three different chairmen in 18 months and the company has not had the chance to chart its own course.
New board members bring considerable expertise, notably Infratil's Lloyd Morrison, in running airports, and Auckland City nominee Richard Didsbury in property, Frankham says.
"The shareholders put them there because they thought they would be good but they're not giving them a chance. We have not had an opportunity to explore the issues in our own right in the way in which we would want to follow our noses."
Frankham, who took over the chairmanship last November, says the past three months have been bruising.
Many among the airport's 50,000 shareholders are confused and grumpy. The diverse nature of the company's register is proving more problematic than ever to please, with its mix of 23 per cent council, a little more than 30 per cent each of retail and institutions, and the balance in index funds.
The Canada Pension Plan Investment Board partial takeover bid closes on Thursday and Frankham last week outlined scenarios and questions his board would have to consider if it failed.
Now that the stapled securities which could have yielded tax breaks of $70 million a year were not an option without further refinement, and a higher Overseas Investment Office hurdle was suddenly imposed, the board had to ask whether it necessarily needed a large percentage holder in the company.
"We need to investigate what it is that a cornerstone investor is likely to bring to the airport," the chairman says.
"Can we achieve the same benefit with a joint venture which doesn't involve capital? Can we do the same by appointing new directors to the board who bring skills and ability, can we rark up the management team by putting on overseas trained and experienced people?"
Frankham says the last few months have thrown up more "twists and turns than a Coromandel back street". Confused shareholders are now facing the prospect of being back at square one after close to 18 months of the airport being in play. This follows years of chugging along below the radar as a takeover target.
It was floated in 1998 - with the fulsome endorsement of then Deputy Prime Minister Winston Peters and his National Party coalition colleagues - but in October 2006 an investment bank representing a still confidential overseas aspirant made an approach with a stapled securities plan.
While the board repelled the approach, momentum for restructuring the capital structure to ramp up debt and improve returns for its council shareholders in particular gathered pace. Doing this internally would have been closed off by the Inland Revenue Department, and the board concluded a buyer would have to take a large slice of the company to be tax effective.
Alternatively an outside party that could help expand routes, offer tourism expertise and aeronautical experience was welcomed.
Enter Infratil, the utilities investor with a 66 per cent stake in Wellington Airport.
"We perceived value in talking to Infratil. We thought it would be foolish not to enter discussions at a high level. We had an initial skirmish but it appeared unlikely from both sides that we could reach a meeting of minds," Frankham says.
Then came a takeover offer from Dubai Aeronautical Enterprises, effectively killed off by Government hostility and public disquiet; a 49 per cent bid by the Canadians which the board spurned; and the most recent 40 per cent offer, which partly changed tack last month.
Which - on the assumption the Government knocks the bid if it's successful - brings Infratil back into the picture.
"We've got to say do we need overseas people involved or is a local company preferable?" Frankham says.
"It takes us right back to the beginning when we were talking to Infratil."
He stresses the airport is not talking to Infratil right now. With Lloyd Morrison on the Auckland board, an Infratil offsider Paul Ridley-Smith does that company's talking.
He said Infratil was "not doing any work on something that might not happen".
"We might all be thinking that the OIO does turn the Canadians down but at the moment there's no point speculating - they're the dance partner at the moment."
While there is fury outside the deal about the foreign control crackdown, those closer to it are more restrained.
Frankham says the board had no inkling of the Government move.
"It's like changing the rules of rugby midstream, and when the referee is unsure and he won't blow his whistle and the players don't know which direction to go in."
Ridley-Smith also stressed Infratil had done no lobbying either.
"We had no idea it was coming."
A supporter of the Canadian bid, Simon Botherway of Brook Asset Management, says: "It's perplexing - it really did catch us by surprise. If we want to sit down here and pretend we're not part of global capital markets we will simply be ignored by global capital and that will raise the cost of capital and that would be a very bad outcome for New Zealand business."
Auckland City has close to 13 per cent of the airport and, like Manukau City, it will not sell its shares and is set to reaffirm its opposition to the deal next week.
Although against the deal, they would have been happy to take the tens of millions of dollars in tax benefits the CPP amalgamation could have brought.
Auckland mayor John Banks says the way in which the Government has conducted itself around the Dubai bid and the Canadian pension fund was "antediluvian".
"The time is now well overdue for the board to breathe through its nose and knuckle down to the day-to-day governance of the airport and the growth of the asset."
That fits with Frankham's view.
"I've got to get six very busy directors in one place for a couple of days - that's very hard to do when we're running around the place squashing spiders."
WHAT NEXT
* The Canada Pension Plan investment board offer closes at 5pm on Thursday.
* If the bid is successful it will lapse 30 days after the closing date if it has not got Government approval.
* Associate Finance Minister Clayton Cosgrove and Land Information Minister David Parker will consider the OIO recommendation.
