Heat on council over airport sale

By CHRIS DANIELS

Decisions facing Auckland City councillors over the sale of the lucrative 25 per cent stake in Auckland International Airport are becoming tougher.

The chances of getting top dollar for the council's shares have dropped since the exit of what is understood to have been the only viable trade buyer - Spanish construction company Grupo Ferrovial.

The shares will now be pitched to institutional investors, in a "book build" before a crucial council meeting on the sale, to be held on Thursday.

The council intends to sell its 25.7 per cent stake by Christmas for about $450 million. This equates to about $5.08 a share.

Now that the only supposedly serious trade buyer is out of the picture, attention is shifting to whether the council will actually go through with the deal, since any book build would mean a price discount for the new owners of up to 10 per cent.

Auckland Airport shares closed on Friday up 1c at $5.16 each.

A $5-a-share price is seen as a psychologically important barrier for councillors, who need to justify their decision on both financial and political terms.

If the council decides not to sell, it may choose to keep the stake on the market, ready for any genuine trade buyer to step in with a higher price in the months to come.

This trade investor would then be poised to launch a full takeover, leading to the eventual delisting of one of the country's best performing listed companies.

Melbourne-based Deutsche Bank analyst Clinton Wood said he doubted that any trade buyer would have been interested in buying the council stake.

The fact that there was none in the running meant that the council would have to accept some kind of discount in the price, he said.

He expected that this discount would be between 5 and 7 per cent, but no one could say what price to take this percentage from.

Wood expected the institutions that would end up buying the shares would more likely come from Europe and North America.

Decisions from the overseas investors would be based largely not on the quality of the asset, but on what level and type of allocation they wanted to make in this part of the world.

One person watching the sales process closely told the Business Herald that there might not be a high level of overseas interest in the airport.

He expected that 5 per cent would be sold into the United States or Britain, a further 5 to 10 per cent to Australian investors, and then the rest to New Zealand based investors.