KEY POINTS:
What is DAE offering to shareholders, including the councils?
The private company, which is controlled by the Dubai Government, is offering shareholders a total of $3.80 a share. This is comprised of $2.34 in cash, a 7c dividend plus one stapled security share, worth $1.39, in a new airport company.
What is a stapled security?
A stapled security is a share of sorts which also earns a rate of interest. It allows the airport company to pay money to shareholders in a more tax efficient manner.
There are doubts about the $1.39 value DAE has placed on the stapled securities. Analysts have warned it could struggle to retain its value if the DAE deal goes through. With airport shares trading at $3.30 yesterday the market is valuing the securities well short of $1.39.
Could Auckland City or Manukau, on their own, use their stakes in the airport to block the airport sale?
No. DAE is seeking to acquire between 51 per cent and 60 per cent of the airport under a "scheme of arrangement". This way of gaining control of a company is allowed under the Companies Act and requires the approval of 75 per cent of shareholders. If DAE was seeking a full takeover it would have required 90 per cent approval and Auckland City with 12.75 per cent or Manukau with 10.05 per cent could have blocked the move. The scheme of arrangement system, also known as a"bear hug", has been criticised by the Financial Services Institute of Australia because of the lower threshold and the effect this has on the rights of shareholders.
If the deal is successful, will the councils have to sell down their holdings?
If the scheme of arrangement is successful, the councils will have no choice but to sell some or all of their shares. They have three options open to them with a mix of cash and stapled securities.
If that is the case, what is this talk of the deal leading to the councils lifting their stakes in the airport?
Theoretically, the councils could sell down their shares in the existing, bluechip airport company and keep or lift their stakes in the new airport company, which will have a lower credit rating and, as such, is a riskier venture.
It would work like this. DAE has set aside a cash pool of $313 million to allow shareholders to take more cash than stapled securities.
Most commentators expect this pool to be fully subscribed. If the councils opted not to take more cash, they could get more stapled securities.
DAE chief financial officer Hamish De Run said some "indicative" numbers showed Manukau could lift its 10.05 per cent stake to 12 per cent or 13 per cent and Auckland City from 12.75 per cent to as much as 15 per cent.
Allocations for more cash or more stapled securities were on a pro rata basis and all shareholders would be treated equally, so there were no guarantees about the final allocations, Mr De Run said.
What are the councils doing about the DAE offer and when will they make a decision?
Auckland City has started consultation on the future of its airport shares by giving people a range of options to consider. It has no plans to give ratepayers specific information about the Dubai or other offers.
So far, 420 submissions have been received, with an August 15 deadline.
Manukau will call for public submissions in mid-September with information based on a report by officers examining the Dubai and any other offers.
When do the councils get to vote on the Dubai offer?
Shareholders will be asked to vote on the takeover bid in November.
This is after the October local body elections, which will give ratepayers the opportunity to question mayoral and council candidates about their intentions to sell or hold on to the shares.
Where do the politicians sit?
It's pretty much a given that Manukau will vote to keep their shares.
Mayor Sir Barry Curtis is the most outspoken advocate for keeping the shares and two other mayoral candidates, Len Brown, and Arthur Anae, have expressed the same view. Even the right-leaning mayoral candidate Dick Quax said his instincts were to hold on to the shares and has expressed concerns about foreign ownership of the airport.
The situation is less certain at Auckland City.
Mayor Dick Hubbard has advocated selling the shares in the past but has still to develop a firm position to take to voters.
Mayoral candidate John Banks and the centre-right Citizens & Ratepayers Now group, which sold half the council's airport shares in 2002 for $190.8 million, have also not told voters if they would accept or reject the Dubai offer. Steve Crow is the only mayoral candidate to say he would sell, and he qualifies his stand.
