Institutional investors in Sydney Airport say they don’t support selling the country’s largest airport operator for $22.8 billion, after an IFM-led consortium sweetened its offer.
Sydney Airport told the market on Monday it had rejected an increased offer for the airport of $8.45 per share, or $22.8bn, after the suitors initially offered $8.25 per share, or $22.3bn, for the company that owns the international gateway into Australia’s largest city.
The offer is from locally-based investors IFM and QSuper and the US-based Global Infrastructure Partners, with AustralianSuper now also part of the line up.
One investor spoken to by DataRoom said it could not understand why the bidders did not lift the offer to $8.50 per share.
“Psychologically, $8.50 sounds so much better than $8.45,” they said.
“It is only 20c (in terms of the increase) and an annoying bid.”
However, sources close to the bidding consortium said since the initial offer was made, the situation surrounding the global pandemic had worsened, with airlines laying off staff and they believed the original offer was fair.
They added that lawyers and experts had carried out a large amount of work to be confident that the proposal would gain the support of the Foreign Investment Review Board.
Yet there has been talk in the market that the board was only interested in an offer above $9 per share, although some shareholders believe that a bid between $8.50 per share and $9 would have secured the consortium due diligence.
Sydney Airport told the ASX its board unanimously concluded the price undervalued its business and was not in the best interest of shareholders.
Shares had started to tick up late last week, in what some suggested was a signal that an increased offer on its way.
The company’s shares had earlier been trading at $5.81 before Monday’s bid was received, although they had been trading at $8.80 before the global pandemic that largely halted international travel.
Sydney Airport, however, did tap the market for $2bn of cash in the pandemic last year when earnings crashed due to closed borders.
Working for the consortium is Goldman Sachs and Macquarie Capital, while UBS and Barrenjoey Capital Partners are advising Sydney Airport and law firm Allens is providing Sydney Airport legal advice.
The offer is subject to major shareholder UniSuper, which holds about 15 per cent of Sydney Airport, rolling its interest into the bid and due diligence, which suggests it will also be involved in owning the airport if it were to be delisted.
IFM already owns 25 per cent of Melbourne Airport and 20 per cent of Brisbane Airport and will not be able to own more than 15 per cent of this asset if its other holdings remain, according to Macquarie analysts.
GIP would not be allowed to own more than 49 per cent under the airport ownership rules for foreign investors.
The original offer equated to 23.3 times the group’s 2023 anticipated earnings, according to Macquarie analysts.
The airport was bought by Macquarie Bank in 2002 for $5.6bn. Macquarie eventually sold its shares in the airport back to its own shareholders, making $377m in the process.
The revised offer, up from $8.25 per share previously, was first revealed online on Monday by The Australian.
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