KEY POINTS:
Melbourne airport owner Australia Pacific Airports Corporation is understood to be about to start due diligence on Auckland International Airport, in a sign the bidding war for the airport may soon heat up.
The development comes after Dubai Aerospace Enterprise on Monday won the Auckland Airport board's endorsement for its $3.80 a share merger proposal that would see it pay up to $2.6 billion for as much as 60 per cent of the airport.
However, the board said it was still talking to other parties and was open to other bids.
Eight parties, including Dubai Aerospace, have been in discussions with Auckland Airport, but contrary to some reports, not all have been conducting due diligence.
Dubai Aerospace has already completed its due diligence; Canada Pension Plan Investment Board remains in the midst of due diligence; and sources said Australia Pacific Airports Corporation was expected to start shortly.
APAC is a joint venture between BAA, Hastings, AMP and Deutsche Asset Management. It acquired Melbourne Airport in July 1997 and Launceston Airport, in partnership with the Launceston City Council, in May 1998.
Both airports are operated under a 50-year lease from the Australian Government, with an option for a further 49 years.
Other parties are understood to be considering whether they can come close to Dubai Aerospace's bid and also move to due diligence. There is potential for other parties to make an all-cash bid below Dubai Aerospace's $3.80 cash and scrip offer.
Macquarie Bank is believed to be considering a bid, but not the bank's airport company Macquarie Airports.
Auckland International Airport chairman John Maasland said yesterday that preference would be given to offers which kept the airport listed.
"The view of the board has always been that we would like to ensure that the company remains a listed entity and the opportunity is there for New Zealanders to play a role in it," he said.
Maasland also defended the board against claims that its potential half-owner Dubai Aerospace was formed only in February last year and as Auckland was to be its first acquisition it had no track record of airport management.
He said Kjeld Binger, chief executive of the airports division of Dubai Aerospace, and other executives had come from Copenhagen Airport and were responsible for its strong growth and international expansion.
"They've got huge expertise over many, many years in running and being involved with probably the highest benchmarked airport in the world, and that's Copenhagen Airport," he said.
"They developed Copenhagen from a very low base in terms of numbers of passengers through to a very large one and they did it not by crushing the airlines because they grew the number of aircraft through there."
Copenhagen also operates airports in the UK, Mexico and China.
Speculation about a takeover for the airport gained momentum last month after the airport revealed Canada Pension Plan had tried to buy shares from the Auckland City Council and Manukau City Council, which between them own 23 per cent of the airport.
But by that stage Dubai Aerospace had already begun due diligence and this week became the first party to make a concrete offer.
It plans to form a new company known as Auckland Airport Limited, which will then buy the shares of Auckland International Airport.
Shareholders would receive $3.80 a share, comprising $2.34 cash, a 7c dividend and a stapled security in the new entity valued by the company at $1.39.
Some 75 per cent of the current Auckland International Airport shareholding will have to vote in favour of the deal for it to proceed.
Shares in the airport dropped 2c to $3.39, which analysts have said reflects concerns about the value of the stapled security and whether the deal will be approved by shareholders.
Broker JPMorgan recommends shareholders should either accept the bid or sell their shares on market.
A counterbid for Auckland Airport is unlikely, given the high price being offered by Dubai Aerospace, the Australian-based brokerage says.
It estimates Dubai Aerospace is offering a price 21 times the airport's enterprise value, that is, debt plus equity. Macquarie Airports by contrast, trades at 16.1 times earnings.
Auckland Airport
* Dubai Aerospace Enterprise's $3.80 a share bid values Auckland International Airport at 21 times earnings, JPMorgan says.
* Currently it is trading at around 19 times earnings.
* Macquarie Airports is trading at around 16 times earnings.
