KEY POINTS:
The chairman of Auckland Airport says limitations on growth, not the size of the slice, was behind the rejection of a Canadian bid for a minority stake.
The CPPIB (Canada Pension Plan Investment Board) wanted to take between 39 per cent and 49 per cent of a newly created Auckland Airport company, leaving existing shareholders with 51-61 per cent.
This removed the concern which many shareholders felt towards a previous proposal from Dubai Aerospace (DAE) for 51 per cent of the airport.
But the airport's board said CPPIB's offer was not in the best interest of the company, ladening it with debt and lowering its credit rating.
Chairman John Maasland told Radio New Zealand that it was feared that debt servicing would become the priority, not expansion.
"Bear in mind we're dealing with a pension fund here, whose requirements are undoubtedly to ensure the maximum amount of money coming out of their investments to fund up their pension schemes.
"And that's their right but it doesn't in our view enable a company such as the airport to grow the way in which we'd like to see it grow."
The airport said its credit rating would have dropped to the bottom of the investment scale if its debt had gone from the current $911m to a proposed $2.6b.
The board was also worried about CPPIB's lack of tourism or aviation expertise.
Mr Maasland noted that Dubai Aerospace offered "experience in airport development, experience in airport growth, the potential for tourism development and route development as well".
In CPPIB's case, "the reverse is true. They would be allowing us to develop in our own way but we'd be constrained by the debt situation to do not much more than operate".
Whether Dubai now re-enters the picture is unclear. Mr Maasland said there were no more proposals on the table .
Brokers are questioning whether minority shareholders, Infratil and NZ Super Fund - who jointly own about 6 per cent of the airport - will take a bigger role.
Asked whether a large overseas investment in the airport was inevitable, Mr Maasland said it was possible.
"But I think what one has to say is, what is reasonable? And I think clearly there are issues here... where New Zealanders, where the councils, where the Government, where other stakeholders have a view that that sort of significant shareholding, if it is overseas, needs to be relatively small."
Manakau City Council has a 10 per cent stake in Auckland Airport and Auckland City holds 12.75 per cent.
Milford Asset Management investment analyst Brian Gaynor questioned the apparent inference by the board that it would prefer a shareholder with tourism or aviation expertise.
That tended to be a criticism of existing management and was not justified, Mr Gaynor told Radio New Zealand today.
"There's been a lot of things that are happening regarding Auckland International Airport in the past two or three months, since the first proposal arose, that are pretty unsatisfactory, and give a view that this board isn't really clear on what it wants."
Auckland Airport shares ended yesterday down 21c or 6 per cent to $2.87 on turnover worth $24m.
- NZPA
