KEY POINTS:
Canada Pension Plan's attempt to buy a minority stake in Auckland Airport, to assuage concerns about control of the airport passing into foreign hands, has failed to win over key shareholder Infratil.
The Canada Pension Plan Investment Board (CPP) yesterday confirmed that it was planning to make an offer for the airport, saying it was seeking a stake of 49 per cent or less.
The CPP announcement comes after Dubai Aerospace (DAE) effectively withdrew its offer for a controlling stake of at least 51 per cent of the airport on Friday. The proposal had run into stiff opposition from the government and councils, who were concerned about selling control of the airport to foreign owners.
The CPP proposal is likely to be a scheme of arrangement, like the DAE offer, which would require approval from at least 75 per cent of total shares to proceed.
A CPP proposal would also involve the issue of new securities which could unlock capital for existing shareholders while preserving the investment grade rating of AIAL, said CPP Investment Board senior vice-president Mark Wiseman.
That means it is important that any offer is politically palatable to Auckland and Manukau city councils, which control 12.5 per cent and 10.5 per cent stakes respectively. CPP has held preliminary discussions with both city councils and Infratil, which holds a 6.2 per cent stake in the airport in partnership with the New Zealand Super Fund.
Wiseman was yesterday pitching its bid for a minority stake as an inclusive proposal which could leave the airport in New Zealand hands.
It would provide a "win-win" scenario, he said.
But Infratil's Paul Ridley-Smith said the difference between 51 per cent and 49 per cent should not beoverstated.
"Two per cent changes absolutely nothing," he said.
"Although they [CPP] are indicating a flexibility on the position they want, if their agenda is to achieve 49 per cent - that also is a control transaction when the shareholding is distributed so it will run into exactly the same issues the Dubai transactionran into."
There had been speculation that Infratil was involved in brokering a deal with CPP and the councils.
Ridley-Smith said although all the parties had been in talks, Infratil was not yet committed to any proposal.
"We're not against the Canadians for a moment. Like we said with Dubai, we've got an open mind. What that really means is we would like to talk to people," he said. "That didn't happen with Dubai because they appeared to lose interest."
Infratil has no objection to a foreign owner having an influential position or a significant minority "but we're not interested in a transaction that delivers control and in this circumstance 49 per cent is control," he said.
Wiseman confirmed yesterday that CPP was acting independently.
"We're not acting in concert with any other parties. Our hope is the other 51 per cent will largely be held by New Zealand interests, so that airport can stay in New Zealand hands,"he said.
Wiseman would not talk about the price or final structure of any offer.
But he outlined a scenario which is likely to provide a way for the councils to retain their current ownership levels and potentially play some role in governance. That could mean seats on the board.
There would also be the option for the councils to "take some capitaloff the table for the benefit of theircitizens."
Asked if that meant creating a new entity - as was proposed by DAE - Wiseman said that was one of a range of possible scenarios.
He could not give a time frame for putting out formal offer.
DAE had said their bid would have delivered up to $3.80 of value to shareholders by way of cash and new stapled securities.
Wiseman said CPP would not look to take an active role in runningthe airport.
"We're not operators and wouldn't pretend to be operators," he said. "Our hope is that by providing long term stable, patient capital that is willing to invest in our assets that working with partners in New Zealand that we'll be able to grow and develop to the benefit of everyone."
Auckland Airport shares closed up 4c yesterday at $3.07.
The CPP Investment Board invests on behalf of a $160 billion pension fund. It is accountable to the Canadian Parliament and the federal and provincial finance ministers.
CPP had been working quietly on an airport offer for more than 10 months now, Wiseman said.
A NEW OFFER
* Canada Pension Plan is seeking up to 49 per cent of Auckland International Airport.
* It plans to make an offer which will allow both Auckland and Manukau city councils to maintain current ownership levels.
* The councils would also be offered some governance role - i.e. seats on the board.
