KEY POINTS:
The Canada Pension Plan Investment Board (CPPIB) yesterday surprised the Auckland Airport board by going public with the pricing details of its proposed offer just a day before it was scheduled to outline the proposal to the airport directors.
CPPIB said its offer would include three options for shareholders.
One is a cash offer of $3.70 per share; the other two involve a mix of cash and shares in a new airport company which would be structured to "provide enhanced returns while preserving the investment grade rating". The second two options would provide value up to $3.90 a share - 10c a share more than the value of the failed offer by Dubai Aerospace.
Airport shares rose 26c to close at $3.30 - well short of the offer price.
The discount indicates there is still a high level of scepticism that CPPIB will be able to make the deal work.
Like the Dubai offer, CPPIB's proposal will require the support of 75 per cent of shareholders. To succeed it must sell the deal to the Auckland and Manukau City Councils - which between them control 23.25 per cent of airport shares.
Brokers and analysts expressed surprise yesterday that CPPIB had risked getting offside with the airport board by "drip feeding" information about the offer to the market.
CPPIB said the move was a response to continued speculation and "market activity".
It is understood the Canadians picked up some on-market buying of airport shares in the past few days which concerned them enough to warrant going public with a price.
Speculation on who might be buying shares centred on Infratil and Macquarie - although analysts noted volumes had not been particularly high.
Sources close to the Macquarie team - which has continued to monitor the airport sale process - denied they had been buying.
Infratil - which already holds a 6.2 per cent stake in partnership with ACC - did not return calls last night.
CPPIB would make no further comment yesterday. The Auckland Airport board responded with a statement confirming that it had received no formal proposal.
While there is speculation that CPPIB may do better than Dubai at selling its deal to the councils, other shareholders were unimpressed with yesterday's release.
Brook Asset Management's Simon Botherway expressed concerns about any possible deal CPPIB may strike with the councils over seats on the board.
"We would not view favourably a situation where there was some - explicit or implicit - co-ordination of director nominations from each of the councils and the Canadians," he said. "Basically you're saying there is a group of three minorities that exercise control without having paid a premium for control."
On the face of it $3.70 looked like a strong cash price, Botherway said. But it was not clear to what extent shareholders would be able to exit for cash and what sort of company they would be left holding shares in.
The Proposal
* Shareholders will be offered three options.
* A cash option of $3.70 per share.
* Two options will include a mix of cash and securities with a value of up to $3.90 a share.
* All three options could be subject to some scaling, depending on shareholder uptake.
* CPP has said it will not seek more than a 49 per cent stake in the airport.
Control Clause Could Be Key
A clause in Canada Pension Plan Investment Board's regulations may provide the company with a way to reach common ground with Manukau City over the level of control it takes in Auckland Airport.
Manukau City's consultation document about airport ownership says "a controlling shareholder would probably have more than 30 to 35 per cent".
But CPPIB has told key shareholders it is not prepared to proceed with a stake of less than 40 per cent.
CPPIB investment regulations state: "The board shall not directly or indirectly invest in the securities of a corporation to which are attached more than 30 per cent of the votes that may be cast to elect the directors of the corporation."
In other words, even if CPP takes a 49 per cent stake in the airport, it will only take up voting rights, with regard to appointing board members, equivalent to a 30 per cent stake.
