KEY POINTS:
The Canadian pension fund bidding for Auckland International Airport has fired the puck firmly back at the Government, announcing it will reduce voting rights in response to new overseas investment rules.
The Canada Pension Plan Investment Board (CPP) said if its bid for 40 per cent of the airport succeeded, it intended to voluntarily reduce its voting power for all shareholder resolutions, with the exception of resolutions affecting the rights attaching to CPP's shares, to 24.9 per cent of all AIA voting shares on issue.
When he announced the tighter investment criteria last Monday, Finance Minister Michael Cullen said the changes had been made in response to the uncertainty and debate that had surrounded the CPP partial bid for Auckland airport.
Changes to foreign investment rules were aimed at ensuring "strategically important" infrastructure assets remain in New Zealand ownership and control.
Speaking after yesterday's Cabinet meeting, Prime Minister Helen Clark said she did not want to comment on any "particular proposal."
CPP vice president - head of infrastructure - Graeme Bevans said from the beginning there was no intention to control the airport and the bid had been structured accordingly.
"However, now that the overseas investment regulations have changed, we have taken further initiatives to make absolutely clear we will not control the airport, even under the revised standards.
"By restricting the vote to that level it gives very clear transparency of our intentions."
In its December 14 offer document, the CPP said it would use up to 30 per cent of its votes to determine the makeup of the airport board.
The CPP yesterday said it was preserving its right to vote in scenarios where it was being singled out for differential treatment such as if overseas investors were paid a smaller dividend.
"If everyone is being treated equally we get to vote on 24.9 per cent."
Macquarie New Zealand investment director Arthur Lim said the move reflected the Canadian's tenacity.
"It's unusual but if one looks at the nature of the Canadian pension fund it is not aggressive.
Not only was board control below the overseas investment threshold, the Government may be placated by the greater strength of a bloc of New Zealand shareholders - the city councils, Infratil and the Superannuation Fund.
Lim said the fact that a wide variety of foreign investors would sell to one single one, the CPP, could also help the Canadians' cause.
"By agreeing to limit their voting to 24.9 per cent they are giving the Government every cause for comfort. It's a fascinating move."
The chief executive of the Institute of Directors, Nicki Crawford said the move was unusual but showed a vote of confidence in the governance of the company.
"Normally if someone is taking such a significant shareholding they want to make sure their investment is being well looked after."
Based in Toronto, the CPP Investment Board had investments totalling C$119.4 billion (NZ$148.7 billion) at the end of last year in publicly-traded stocks, private equities, real estate, inflation-linked bonds, infrastructure and fixed income.
Bevans said in other investments the CPP had opted for voting control disproportionate to its holding.
"Effectively the way we look at things is 'what's the relationship between the parties, what is each party trying to achieve and as long as we think there's commercial alignment then we're comfortable to play with the respective rights of the investor rights'." The bid closes at 5pm this Thursday. The CPP was still hoping to meet the Government ministers, Bevans said. Last night the airport share price closed at $2.25.
BUMPY FLIGHT
February 25: Government shuts loophole on stapled securities, a key part of Canadians' amalgamation proposal.
February 26: CPP says it is happy to work with IRD on the details.
March 3: Govt crack down on foreign control of strategic assets.
March 10: CPP says it is willing to reduce voting rights to under 25 per cent.
