KEY POINTS:
A plan by the Auckland Airport board to offer brokers a commission when their clients oppose the partial takeover offer by Canada Pension Plan Investment Board does not break listing rules, the stock exchange said yesterday.
The plan sparked an intense debate in the financial community yesterday.
Shareholders Association chairman Bruce Sheppard has questioned the morality of the move to incentivise brokers in what is ultimately a democratic process on whether a sale can proceed.
While it was normal for the acquiring company to pay a commission to brokers for sale of the shares, it is a highly unusual move for the company being taken over to offer an incentive for opting not to sell.
"While there doesn't appear to be any listing rule which prohibits this, NZX would expect advisers to disclose the fee they are getting to clients so clients know whether the advice they are receiving is independent," Lucy McFadden of NZX said yesterday.
An Auckland Airport board spokeswoman said the move was made to balance the situation where brokers whose clients voted "yes" got a payment.
"The directors wanted to balance the incentive offered by CPPIB and it is an unusual situation because a partial takeover is unusual."
Shareholders were being asked to do two things in response to the offer.
One is to approve whether the Canadians should be able to hold 40 per cent of the company. Takeover law requires the pension plan to get approval from a majority of those who send back forms in order to proceed.
The other part of the deal is that they need to acquire the shares.
The board has concerns that those who do not accept the offer may not bother to send back forms and vote - thus lowering the threshold required by the Canadians to proceed.
The Auckland Airport board rejected the pension plan's bid on Monday despite the offer price of $3.6555 being well above an independent valuation by Grant Samuel.
It has been actively campaigning against the bid with advertisements in newspapers.
Sheppard yesterday suggested that both sides should offer no commission on the deal. He said that although he understood the airport board's arguments for offering a commission, they did not make the situation any more morally palatable.
"Now we have a really bizarre situation where the bidding war for AIA could become a bidding war for the hearts and minds of brokers," he said.
"What is to stop the Canadians raising the fee they pay to the brokers to procure an acceptance?
"Of course the AIA shareholders are now fully aware that commissions are being paid so expect that they will ask for a share either way.
"The Canadians could increase the bid without breaching the code as the sharing of the commission is a matter between the broker and his client. The AIA counters and increases their commission and so the cycle goes on."
Auckland Airport shares closed unchanged yesterday at $2.72.
