KEY POINTS:
- What do you think of the government's decision?
National says the government is playing reckless politics by vetoing a decision to allow a Canadian company to buy a stake in Auckland International Airport (AIA), despite official advice which said the deal could proceed.
Land Information Minister David Parker and Associate Finance Minister Clayton Cosgrove used their power under the Overseas Investment Act to block approval for the Canada Pension Plan (CPP) 40 per cent buy up of AIA shares.
In its report to the ministers, the Overseas Investment Office (OIO) recommended the sale be approved. It said the sale would have substantial and identifiable benefits to New Zealand.
The main basis for the ministers rejecting the decision was on benefit criteria.
The airport's share price was down 23c, or 10 per cent, to 212 by mid-afternoon today.
National Party Leader John Key said the decision was blatantly political and ACT said the government had botched its handling of the case, however NZ First welcomed the decision saying it was the right thing.
Mr Key said today's decision showed Labour did not value international investment.
"This sends a terrible message to investors that the Labour Government is prepared to play recklessly with investment rules," he said.
"Labour has put up a `don't invest here' sign on the New Zealand sharemarket."
In the face of concerns about foreign ownership of key assets the Government last month tightened overseas investment regulations regarding foreign companies buying large New Zealand assets.
Mr Key said it was unusual to take such a step midway through the sale process; "now, ministers have made a decision all in the name of blatant politics".
He said the interference meant "it's not safe" to put money in the New Zealand sharemarket.
"The rules are now subject to naked politics, and that means no certainty for anyone."
He questioned how Labour could say it supported investment when its actions would wipe "hundreds of millions of dollars off the value of people's savings in Auckland Airport".
National would have ensured a 51 per cent majority remained in New Zealand hands and it would have accepted the OIO recommendation.
ACT leader Rodney Hide said investors would be wary in future.
"Investors want certainty of the rules but Labour keeps chopping and changing them - even showing its willingness to change the rules halfway through the process."
But New Zealand First leader Winston Peters said the Government made the right call.
"New Zealanders have made their views clear on this matter - they want their strategic assets to remain in New Zealand ownership," he said.
"That way the profits and ongoing benefits from the airport will remain in New Zealand."
He said the decision made good economic and strategic sense which would see long-term benefits.
As reported earlier, the Canadian pension fund will walk away from New Zealand after the two Government ministers rejected a recommendation by the Overseas Investment Office and knocked the deal back.
A spokeswoman for Mr Parker said the decision was the ministers' to make and they had considered all the information in the OIO report before reaching a conclusion.
"They take into account the advice that was given to them ... but their conclusion is different from the one the OIO came up with."
The Canada Pension Plan Investment Board (CPPIB) won shareholder approval for the deal.
Auckland International Airport shares lost 25c, or 10.6 per cent, to $2.10 when the sharemarket opened at 10am today, after the government announcement.
The CPP's vice president _ head of infrastructure, Graeme Bevans, said the year-long attempt to buy a stake in the airport was now ended and the board would not seek a judicial review of the decision.
"This is the end of the bid."
The ministers set out their reasons for declining the application under the Overseas Investment Act 2005 in a nine-page document and say there will be no further comment.
They were provided an Overseas Investment Office analysis of the application and said considering all relevant factors the ministers were not satisfied the proposed $1.8 billion investment was likely to benefit New Zealand.
"We are conscious that others may disagree. In particular others may disagree on the basis of incoming funds arising from the sale of AIAL shares accruing to New Zealand shareholders is of such magnitude as to constitute a benefit in itself," they said.
"However all new overseas investments would bring funds to New Zealand. There is no legal authority for ministers to consider funds coming into the country as a benefit in itself, independent of evidence that the incoming funds are related to the statutory criteria and factors."
They said if they were to consider the benefit to shareholders it would not meet the bar for being substantial or identifiable.
Bevans said it was natural to feel flat after such an outcome.
"CPPIB appreciates the support we have from the 29,000 largely New Zealand, Auckland International shareholders who accepted the offer."
The offer will now lapse and shares can be freely traded.
Bevans said it was up to each individual foreign investor to make their own assessment of the investment climate in New Zealand.
Chairman of Auckland Airport, Tony Frankham, said while the decision of the Ministers is not consistent with the wishes of a majority of Auckland Airport shareholders, the board nevertheless needed to focus on moving the business forward.
Directors would re-consider the issues of the company's capital structure and prospects for introducing a new cornerstone shareholder that could add strategic value.
"These issues will be revisited in light of the very different circumstances we face today; including the new limits placed on investment in strategic assets by overseas investors, the changes in the tax treatment of stapled securities and the material deterioration in global financial markets," he said.
The premium between the Canadians' offer price and yesterday's closing price was around $600 million for shareholders who accepted the deal.
National Party leader John Key said the decision was blatantly political and sent a terrible message to investors that the Labour government was willing to "play recklessly" with investment rules.
"The rules are now subject to naked politics and that means no certainty for anyone," he said.
Oliver Saint from the New Zealand Shareholders' Association said the decision to reject the Canadian bid was expected.
He saw it as ideologically driven, and an indication of a Government that expected to be beaten at the next election.
"They're making rules up as they go along," he said.
Despite that he expected the wider implications of the decision to be limited.
In future, overseas investors would probably ask themselves whether a possible investment was likely to be considered by politicians as a core asset, Mr Saint said.
If they decided it was, they might have second thoughts.
"It's time New Zealand came out and said what its core assets were," he said.
