Takeover offer for Sydney Airport falls short once again

Sydney Airport’s board has knocked back a revised takeover offer, saying it still undervalues the gateway.

Sydney Airport’s board remains hopeful of better times ahead after knocking back a second offer from an alliance of infrastructure and pension funds. Picture: NCA NewsWire/Flavio Brancaleone

Sydney Airport’s board has knocked back a revised offer from an alliance of infrastructure and pension funds that priced Australia’s largest gateway at almost $23 billion.

The revised proposal offered $8.45 a share, up 2.4 per cent from the $8.25 a share offer that was rejected in July.

It’s previously been suggested that the airport board was looking for something in the vicinity of $9 a share.

In a statement to the ASX, the board said the revised proposal from the Sydney Aviation Alliance still undervalued Sydney Airport and was not in the interests of shareholders.

It remained of the view the Sydney Aviation Alliance offer “was opportunistic” and seeking to take advantage of the devastating impact of Covid-19 on the aviation industry.

“The current environment does not change the board’s view of the long term value (of Sydney Airport),” said the statement.

“The board also notes the rapid increase and acceleration in Australian vaccination rates in recent weeks and the governments’ plans to progressively ease restrictions as the population reaches vaccination targets which will then see the reopening of travel.”

The board noted that the airport remained “strongly positioned … to respond to a range of recovery scenarios and to pursue sensible growth opportunities as the recovery unfolds”.

They pointed out the “strategic and irreplaceable nature of Sydney Airport, as one Australia’s most important infrastructure assets”, the diversity of earnings, significant value of land assets and the airport’s “consistent delivery” of value to shareholders.

Made up of IFM Investors, QSuper and Global Infrastructure Management, the Sydney Aviation Alliance was yet to respond to the board’s statement.

Their initial offer in early July saw the airport’s share price soar from $5.83 to $7.76 in a day.

Since then the share price has been fairly stable, closing at $7.75 a share in last Friday’s trade.

The board again indicated that it would be open to engaging with the alliance “should the consortium be prepared to lift its indicative price to appropriately recognise long term value” for Sydney Airport shareholders.

The airport’s biggest shareholder, UniSuper, has previously indicated its positive view of the Sydney Aviation Alliance members and its hope a deal could be done.

In July, chief investment officer John Pearce said he thought $9 was an “overly optimistic” share price for Sydney Airport given the changed circumstances.

“The short term outlook for airports is not that rosy and we’ve also got to accept that Sydney Airport had a highly dilutive capital raising in August last year,” Mr Pearce told The Australian after the board knocked back the first offer.

“I think there’s a deal to be done here and it’s a balancing act. On one hand, (I) totally understand why they want to get to a higher price but on the other hand they’ve got to get a deal done.”

Sydney Airport will release its half-year results for 2021 on Friday, following on from the asset’s $107.5 million net loss for the full year of 2020.