KEY POINTS:
The Dubai Aerospace Enterprise (DAE) bid shows all the signs of a swiftly arranged courtship where the prospective bride (Auckland International Airport) has decided to secure her own preferred marriage partner instead of succumbing to the all-or-nothing offers being worked up by three other suitors.
This particular bride has shown she is gifted with unusual strategic insight. But whether her chosen partner (which in effect is Dubai Inc) gets its feet under the kitchen table depends more on politics than the $3.80 a share financial consideration that has been offered.
You won't get Auckland International Airport's board or management to say outright that they solicited DAE's attention: the people behind AIA are much better versed in courtship than to admit to anything other than a mild fluttering of eyelashes at DAE's top brass.
But shareholders are unlikely to accept at first blush DAE's suggestion that its interest was simply the result of reading stories that a Canadian pension fund and Macquarie Airports were sniffing about Auckland Airport rather than a behind-the-scenes nudge.
Naysayers will point to the fact that the Dubai company does not have a long-established track record in running airports. They will also question the extent of due diligence that Auckland Airport's board, led by prominent businessman John Maasland, did on their prospective majority owner before signing a merger implementation agreement.
But critics, who include NZ First's Winston Peters and Manukau Mayor Sir Barry Curtis - whose council has a 10.05 per cent stake - should not dismiss the bid out of mere xenophobia, or, because they are frightened that control of one of New Zealand's major strategic assets will disappear offshore, and, into Arab ownership at that.
The fact is that New Zealand is negotiating a free trade deal with the United Arab Emirates. It will cement this country's vital trade and investment linkages with what is now our 29th trading partner.
But that is small beer to what is on offer for New Zealand if we can patch ourselves into the psyche of the Dubai-centred kingdom as a valuable international partner in the same way we managed with China.
Being in on-the-ground when a major new power begins to feel its oats is important. New Zealand offered China a helping hand by backing that great nation's bid to joint the World Trade Organisation. China reciprocated by opening bilateral trade talks with New Zealand.
Dubai's growth has been phenomenal.
Dubai Inc (via Emirates airline) backed New Zealand's bid for the America's Cup. The capital, connections, and know-how that DAE will bring to the table should similarly enable Auckland Airport to play in a bigger league than would otherwise be the case.
There's no reason to think that its backing for New Zealand's premier airport would be other than supportive. What is apparent from the merger document is the fact that if DAE ultimately succeeds in getting 51-60 per cent of the AIA business, Auckland Airport will be able to draw on the connections of DAE's shareholders.
Those include EMAAR, ISTITHMAR, Dubai Airport Free Zone Authority (DAFZA), Dubai International Capital, DIFC Investments LLC, the Government of Dubai and AMLAK Finance.
DAE will be given every encouragement by Dubai Inc to make good its commitment to forge greater trade and investment between the Dubai, elsewhere in the Middle East and New Zealand.
What upsets some is a clause in the merger implementation agreement that says the DAE group will use reasonable endeavours to create new routes and services to Auckland for Emirates Airlines. This is hardly a Trojan horse for Emirates.
DAE says Auckland Airport's board insisted that the clause was there to make all prospective agendas apparent.
DAE Airport's chief executive Kjeld Binger says if the merger proceeds there will also be a big push to get more tourists to New Zealand from India and China, and not just the Middle East.
The proposal involves an amalgamation and the establishment of a new company, Auckland Airport Limited, in which DAE would invest up to $2.6 billion and hold between 51 per cent and 60 per cent of the shares, and 75 per cent of share-holders would have to approve a scheme of arrangement for it to proceed.
Manukau Council and Auckland City Council which between them have 23 per cent of the shares could form a blocking stake.
But there's nothing to stop them continuing to hold a stake in the airport's fortunes by taking up stapled securities in the new ownership company, which will be named Auckland Airport Limited.
The Auckland Airport board and DAE have a lot of work to do to convince the councils to either sell their stakes or take up stapled securities in the new company.
The deal will not be voted on until November - after local body elections take place. It is possible the councils would seek board representation if they decide to stay in - a factor that is not in the current merger deal.
Meanwhile, Auckland Airport cannot actively solicit any further suitors, but it can continue to talk to the three who have already expressed interest.
If a higher bid eventuates, the board would have to put it to shareholders. But by signing an agreement with DAE it has effectively signalled a preference for a deal that will enable the airport to remain listed after an ownership change rather than disappearing from the market.
Where the going gets really tricky is at the national political level.
Unlike Australia, New Zealand's airports are not regarded as strategic assets. Under our open slather overseas investment rules, there are no restrictions on the percentage of ownership that can be in foreign hands. But because the deal is said to involve sensitive land it will get extra careful consideration.
In effect, the proposed ownership change will bypass the Overseas Investment Office and go to two Cabinet Ministers for a decision, thus opening the door for Peters to exert extra influence through his direct connections with Labour.
What the ministers will examine is whether the overseas investment will result in consequential benefits to New Zealand such as additional investments in New Zealand or sponsorship of community projects; whether DAE is is a key person in a key industry of a country with which New Zealand will, or is likely to, benefit from having improved relations: whether refusing the application for consent will, or is likely to adversely affect New Zealand's image overseas or its trade or international relations, result in New Zealand breaching any of its international obligations; result in DAE undertaking other significant investment in New Zealand; whether DAE has previously undertaken investments that have been, or are, of benefit to New Zealand; whether the overseas investment will, or is likely to, advance a significant Government policy or strategy and whether DAE's investment is likely to enhance the ongoing viability of other overseas investments undertaken by DAE.
On the surface the DAE/Auckland Airport deal does meet many of the "sensitive land" criteria. The merger implementation documents address many of the national interest considerations.
But Cabinet Ministers will want to test those statements rigorously before putting their imprimatur to the proposal.
