KEY POINTS:
The Government faces an urgent task to reassure international investors that it will not put cheap politicking above New Zealand's hard-won reputation as a fair dealer for foreign owners.
How can Dubai Aerospace Enterprise believe it will get a fair political hearing on its bid for Auckland International Airport after statements from a leading Cabinet minister have exposed Government opposition to the deal?
DAE might have to refashion its $2.6 billion offer for up to 60 per cent of Auckland International Airport as a living document if it is to gain sufficient political support to get it over the line.
The DAE/Auckland Airport merger deal has been fashioned to bring onboard a major offshore strategic shareholder to assist the company's expansion.
When the DAE's ebullient chief executive, Kjeld Binger, launched the bid on July 23 he was adamant the terms of the proposed merger with Auckland Airport were full and final.
The DAE deal was not simply structured on the usual price per share multiples which underpin most takeovers. It was the result of a negotiation between the fledgling Dubai company and Auckland Airport's five-strong board which was structured to meet DAE's objective to own the controlling stake in the company.
The Auckland Airport directors wanted a major shareholder which could assist at the strategic level - rather than see the prize asset disappear off the NZX into a private equity firm or pension fund without skin in the game. It would also ensure existing shareholders, which include two Auckland councils, could share in the upside by agreeing to a deal that would give them $2.34 cash for each of their airport shares, a 7c dividend and a stapled security share in a new company valued at $1.39 taking the total value to about $3.80 a share.
It's unclear what - or who - flicked the switch of the normally sanguine and reliable (at least as far as business is concerned) Phil Goff last weekend when he said publicly that the Government agreed with Auckland opposition to the deal.
Neither DAE nor Auckland Airport expected such a major political outburst from a respected Cabinet minister.
The Government had already decided the DAE bid should be treated as a sensitive land matter under the Overseas Investment rules, putting Associate Finance Minister Trevor Mallard and Land Information Minister David Parker in the ultimate box seat rather than the Overseas Investment Office.
At first blush the co-operation agreement that DAE and Auckland Airport have signed, together with a merger implementation plan, addresses the criteria for sensitive land approvals. Things like relevant business experience, commitment to the investment and so forth.
But Goff knows very well that Auckland International Airport is 75 per cent owned by private shareholders. The Government does not have a stake in Auckland Airport - unlike, Christchurch, Invercargill or Dunedin airports.
Auckland City Council and Manukau City Council have less than 25 per cent between them, hardly public control.
Auckland Airport shareholders also have rights which Goff has been ready to trample over to make cheap political capital.
His comments knocked the guts out of Auckland Airport's share price, diminishing the on-paper wealth of the thousands of New Zealanders who have shares. His speech reaffirmed fears that a minority government hostage to the whims of smaller parties will cave in to their fearmongering.
In Parliament yesterday, Green MP Sue Kedgley and NZ First's Brian Donnelly attacked the bid.
The Government's exposure is obvious.
The fact Goff used the launch for the City Vision ticket for the upcoming local body elections in Auckland to say the issue had been handed to us on a plate brings politics into the equation.
Goff's words make it look as if the Government has already decided to pan the DAE proposal before it even goes up for approval and that it is prepared to rally the Auckland public against the deal to help more left-leaning candidates onto local councils.
His comments will also come as a major surprise to Sultan Ahmed Bin Sulayem who Goff met in Auckland just before the bid was announced. After that meeting Goff was reported as saying the NZ Government would not share US protectionist concerns as far as Dubai investment was concerned.
But there's another factor.
Finance Minister Michael Cullen had already recused himself from making the OIO decision as he is shareholding minister for Air New Zealand, which is itself preparing a submission against the DAE deal.
Yesterday Cullen affirmed confidence in the approval process.
But DAE will be assessing its options.
They will want to gauge whether Mallard and Parker have made their minds up to vote the deal down.
They will also want to know if the ministers have any concerns whether they will simply ask DAE to enter a deed of undertaking with the Government to keep Auckland Airport headquartered in Auckland, protect New Zealand's major airport hub, ensure additional tourism traffic comes here and ensure Auckland Airport spearheads any offshore expansion rather than DAE.
It is stretching credulity to use sensitive land rules, which were designed to assuage concerns over the sale of prime coastal farm land, to assess an airport sale.
If the Government truly believes airports are a strategic asset, it should clarify the overseas investment rules.
That would eliminate the current situation which allows the xenophobes and the unscrupulous to make political capital out of merger deals.
