Auckland Airport sale goes down to the wire

By CHRIS DANIELS and PAUL PANCKHURST

The big question in the sharemarket is this: how low will Auckland City Council go?

After a global sales pitch, merchant bankers will brief a council working party tonight on how much investors are willing to pay for the council's 25.7 per cent stake in Auckland International Airport.

At yesterday's closing price of $5.10 - a drop of 12c for the day - the stake is worth $398 million.

A full meeting of the council tomorrow evening at the town hall will decide if the sale goes ahead.

Sharebroking firms value the airport company at $5.80 to $6.10 a share.

A sell-off to institutions would certainly be at a discount to the share's trading price - but brokers are speculating about just what level of discount the council would wear.

"I reckon the bids are going to be below $5 - and I'm not quite sure if that's politically acceptable to the council," said one yesterday.

Councillors contacted yesterday by the Business Herald would not nominate the lowest acceptable price.

Asked about the idea of a psychological barrier of $5 per share, councillor Doug Armstrong - the chairman of the working party - said: "No, I don't accept that at all. No psychological barriers. We're going to do what makes sense for the ratepayer."

The council holds 78.1 million shares, so each 5c variation in the sale price amounts to a $3.9 million difference in what the council will pocket.

Investment bank First NZ Capital co-ordinated the two-day "book build" - a soliciting of offers from investors in New Zealand and overseas - that finishes at 4:30pm today.

Credit Suisse First Boston and JBWere took part in the overseas side of the process.

Earlier, a roadshow went around the world to drum up interest.

The council's working party - Armstrong, David Hay and William Cairns - gets the first briefing on the results of the book build.

All councillors, including those who have always opposed a sale, will receive a briefing tomorrow, before heading into the full council meeting, at 6pm.

Here - in a session closed to the public - the councillors will hear about the sales process, and finally vote on whether to proceed.

It has been a "twin track" process, with trade buyers - those interested in owning and running an airport - courted along with institutional investors, those who would want much smaller portions of the company to add to their portfolios.

One potential trade buyer was the Spanish construction company Grupo Ferrovial.

It is not clear whether this company has lost interest - or is biding its time, hoping to jump in later and on better terms.

Mayor John Banks has said the shares will only be sold for a good price.

However, he and his supporters have committed to selling them - and preferably before Christmas.