KEY POINTS:
Dubai Aerospace Enterprise executive Kjeld Binger got back to New Zealand last week from honeymooning in Mexico to face a spoiler from the Cullen Fund which could upset DAE's attempt to get 51 per cent control of Auckland International Airport.
DAE had already been blindsided by the extent of Government "opposition" to the deal, having been assured by the Auckland International Airport's board that the Government welcomed foreign investment.
That Binger was surprised at the advent of the Government-owned NZ Superannuation Fund onto Auckland Airport's register is an understatement.
The ebullient Dane is not conceding defeat at this stage or even the need to refashion DAE's bid. He simply issued a "comfort statement" saying he was "neither surprised nor concerned".
It now seems obvious that DAE will have to make some concessions to the Airports major shareholders if it wants to stay centre stage in the battle for control of NZ's premier airport. The trick is whether DAE will be prepared to see its proposed stake shrink below 51 per cent - the level the Dubai-based group has stipulated necessary to consolidate the acquisition, get control of company cash flow and can set the future dividend rate - or go back to the table and reach a new merger agreement with an emerging power bloc which meets the commercial objectives of all players.
A new deal may not be as commercially attractive to DAE as what's currently on the table. But the relative silence from Auckland Airport's directors - since the super fund burst onto the scene - suggests the board has gone a bit soft on its pledge to combine PR forces and vigorously promote the DAE/Auckland Airport merger terms.
Binger is sufficiently a professional in the international airports game not to make the classic mistake of claiming the NZ Government somehow orchestrated the spoiler to stop DAE from getting sufficient support from Auckland Airport's shareholders to get its $2.6 billion bid over the line.
Trade Minister Phil Goff shouted out Cabinet's blatant opposition to the deal two weeks ago, exposing the Government to a potential request from DAE for a judicial review if Cabinet Ministers Trevor Mallard and David Parker turn down the company's Overseas Investment application to acquire "sensitive land".
But the emergence of the NZ Super Fund and Lloyd Morrison's Infratil onto the airport's shareholding register, with a combined 6.2 per cent stake, makes it harder for DAE to get over the 75 per cent shareholder voting threshold necessary for the bid to succeed.
DAE already faces a potential blocking move from Auckland and Manukau city councils which between them have 22.8 per cent of the shares. With the addition of the NZ Super Fund's 6.2 per cent stake to the councils' 22.8 per cent bloc - the four NZ-based parties have 29 per cent of Auckland Airport between them. And that figure may increase if Morrison decides to buy more shares - as he has indicated.
If the deal is voted down there will be no need for Cabinet Ministers to make a decision, thus removing the potential for the Government to be accused of bias against "Arab" offshore investment in the event of a "nay" decision.
Surely the Wellington power elite is not capable of orchestrating such a delightful 'litany of coincidences'?
Or have NZ Super Fund boss Adrian Orr and fellow Wellingtonian Morrison simply read the signals well?
Morrison - like Orr, a committed NZ nationalist - has begun talking to the councils to see if they could form a separate strategic alliance. He says he expects to be involved in more discussion over the airports optimal ownership and control structure and has an open mind on Dubai's offer.
But Morrison and Binger have yet to touch base.
Binger has met Orr and is in meetings with the executive teams from the two councils.
But at this stage the DAE executive seems to be pushing the merits of the current deal rather than examining points of convergence for a new strategic alliance.
The problem DAE faces is knowing to what extent the councils are also taking their own soundings.
It might be going too far to say the Auckland board is factionalised - but chairman John Maasland and directors Mike Smith and Tony Frankham are said to be more gungho about the DAE bid than Joan Withers and Keith Turner. This potential to exploit perceived board differences - irrespective of the terms of the cooperation deal between DAE and Auckland Airports board - will be uppermost in the minds of the council's senior executives, Morrison and Orr.
Binger and Smith were the key negotiators on the merger terms for the DAE deal. It has been fashioned in a way that will enable the councils to maintain a shareholding in a new airport and get some cash out.
But the nifty tax structuring is another potential hot potato.
Auckland Airport currently pays company tax on its profits and shareholders received fully imputed dividends. But as councils don't pay tax it means they are not receiving the greatest value from their investments.
But under the new deal the investment returns will be taxed in the hands of the shareholders - not at company level. This means the councils can (on the surface) achieve higher returns. It also increases the potential revenue to DAE which will face a lower withholding tax.
There's another issue.
The consultation process undertaken by Auckland council was based on the proposed Canadian bid.
With all these variables in play it would make sense for the major players to start talking - together.
