Auckland Airport shareholders vote for capital return

By ELLEN READ

Auckland International Airport shareholders have overwhelmingly approved the company's $213 million capital repayment, with 99 per cent of those who voted agreeing to the plan.

The repayment, which would see seven shares out of every 25 cancelled and $1.80 in cash paid for each cancelled share, required a minimum of 75 per cent approval.

Auckland Airport will now seek a final order from the High Court sanctioning the capital return. The process is expected to be completed next month.

The purpose of the capital return is to restructure the company's balance sheet by increasing debt, which provides a cheaper source of funding than shares.

Chairman Wayne Boyd told yesterday's special meeting on the plan that the arrangement was the most effective and equitable way of returning surplus capital to shareholders.

"Not only will the company end up returning the desired amount to shareholders, but it will also leave the relative voting distribution rights of all shareholders unaffected," Boyd said.

The effect on shareholders will be neutral: the value of their investment will be the same immediately before and after the capital repayment and their stake in the company will remain unchanged.

Although the $1.80 to be paid for each cancelled share (the share's issue price) is lower than the current trading price, the share price will rise after the repayment, to reflect the smaller number of shares on issue.

Based on yesterday's closing price of $4.41, Auckland International Airport shares should be worth $5.42 after the cancellation.

Auckland City Council plans to sell its 25.7 per cent stake and has appointed First NZ Capital and affiliate Credit Suisse First Boston as advisers.

Manukau City Council owns a 9.6 per cent stake in the airport.

* How the maths works: After the capital return, each investor will own the same proportion of the company's shares as before, so the value of his or her investment should remain the same. However, some of that investment will now be in cash.

For example, at yesterday's closing price of $4.41, a parcel of 1000 shares is worth $4410. After the capital return the investor will have $504 ($1.80 for each of the 280 shares cancelled) and 720 shares. The value of those shares, plus the cash, should still be $4410. For that to be the case, the share price will need to rise to about $5.42.