Airport lashes out at Super City exemption

Selling down the combined shareholding could have whipped up a political storm. Photo / Richard Robinson

Auckland Airport has hit out at a Super City law change that will exempt a combined council shareholding in the company from normal takeover rules.

Manukau City and Auckland City's stakes in the airport will be combined to reach 22.8 per cent when the new Auckland Council comes into being.

Under the Takeovers Code, owners of more than 19.9 per cent of a company must make a takeover bid for at least 51 per cent of a company.

Auckland Airport's chairman Tony Frankham said his company was disappointed at the Government's use of targeted legislation to override the code.

"There's a rule of law there that applies to everybody - they're sending the wrong signals out to the market and internationally about the way in which New Zealand regulators and the governments look at investment."

Frankham said other shareholders were unlikely to have approved the move if they were given the chance to vote on granting consent, another option under the code.

"We've got no indications of any adverse relationships with the present councils or the combined council but you've always got to say that a 23 per cent shareholder has a bit more grunt than the others and you've got to ask whether that's compatible with all other shareholders in the company."

The Takeovers Panel could have ordered the councils to sell down their shareholding to 19.9 per cent but such an asset sale could have whipped up even more political opposition to the contentious Super City plan.

Cabinet papers show the Internal Affairs Department advised it could be "seen by ratepayers as Government selling off Auckland's assets".

It could have also resulted in the perception of a "fire sale" and reduced the value of shares and would have needed approval from Auckland and Manukau councils, with the resulting public consultation process. The department also warned that it was unlikely the Takeovers Panel would grant an exemption and that it would incur compliance costs.

Local Government Minister Rodney Hide said all parties had the opportunity to make submissions during the select committee process on the law change, which is unprecedented.

"Ministers carefully considered this matter and believe that this is a pragmatic solution. The local government reorganisation of Auckland is not a normal market transaction and does not change the proportion of the company shareholding that is in council hands," he said.

Frankham said there had been a struggle to get the Takeovers Code up and running and he didn't see why it could not be applied evenly. "The 19.9 per cent threshold is a fundamental principle which is based on international precedent."

In 2007, the previous government's coolness to a bid by Dubai Aerospace helped scupper that deal and sudden rule changes on overseas investment sank a bid from Canada Pension Plan Investment Board.

"The Labour Government tinkered with it, sadly we're seeing the National Government tinker with it. It doesn't need to happen," he said.

CRACKING THE CODE

* The Takeovers Code says that owners of more than 19.9 per cent of a company must make a takeover bid for at least 51 per cent of the company.

* When the new Auckland Council is formed Manukau City and Auckland City's stakes in the airport will be combined to reach 22.8 per cent.

* However, a targeted law change will exempt the combined council from having to make a takeover bid.