Auckland airport ends discussions with CPPIB

Nicole Mezzasalma

Print Article E-Mail Article E-Mail Author

Increase in the company’s debt, lack of tourism experience and reduced financial flexibility led the board not to recommend a deal

The directors of Auckland International Airport Limited (AIAL) have announced they have ended discussions with Canada Pension Plan Investment Board (CPPIB) in relation to the sale of a significant interest in Auckland airport. According to AIAL’s statement, “a majority of directors do not believe that pursuing the proposal is in the best interests of shareholders or the company and therefore will not be recommending the transaction.”

AIAL chairman of the board John Maasland said the proposal would have involved an amalgamation and the creation of a newly-listed airport company, of which CPPIB would have owned between 39% and 49%. He said: “If the amalgamation proposal had gone ahead existing Auckland airport shareholders would have retained between 51% and 61% of the new company and maintained an investment in the restructured company. The board needed to be certain that it was a proposal we would recommend and, on that basis, we needed to consider a range of related factors. These included the proposed structure, growth prospects, risk profile and the long-term value of the new company, as well as the price offered to shareholders and the likely market trading price of the new securities. After serious consideration of all of these matters the majority of directors have formed the view that the proposal would introduce an unacceptable increase in risk which would be likely to have an impact on the long-term value and prospects of the company.”

Areas of concern included the significant increase in the level of debt within the CPPIB proposal, which would have seen the company’s debt move from NZ$911m ($698m) as at June 30 2007 to NZ$2.6bn ($2bn) within five years, and a reduction of the company’s financial flexibility due to the terms of the new securities and debt financing proposed.

Maasland added: “While CPPIB would have been a committed long-term investor, it is clearly not able to bring industry or tourism experience—which makes it a less attractive option when compared with the Dubai Aerospace Enterprise proposal, which the board unanimously recommended in the absence of a superior proposal.”