The sale of Australia’s biggest airport moved closer on Monday as Sydney Aviation Alliance, an infrastructure investor group, won permission to conduct due diligence on Sydney Airport Holdings Pt Ltd after improving its takeover offer to A$23.6 billion ($17.4 billion).
The move sent the airport’s shares up 5%, with analysts saying a rival bid appeared unlikely given the scale of the funding needed and foreign ownership rules that mean the airport must remain 51% Australian owned.
The improved offer of A$8.75 a share – an increase of 3.6% – follows prior proposals from the consortium pitched at A$8.45 and A$8.25, both of which were rejected by the airport operator’s board as inadequate. read more
Sydney Airport shares were trading at A$8.40 on Monday morning, below the offer price, due to the length of the time the transaction will take to complete as well as the limited prospects for a rival bid.
The bidding consortium, Sydney Aviation Alliance (SAA), is comprised of Australian investors IFM Investors, QSuper and AustralianSuper and U.S.-based Global Infrastructure Partners.
Record-low interest rates have prompted pension funds and their investment managers to chase higher yields. Australia’s other major airports are unlisted and owned by pension funds and infrastructure investors.
SAA has been granted non-exclusive due diligence that is expected to take four weeks after signing a non-disclosure agreement, Sydney Airport said.
If SAA makes an acceptable binding proposal, the current intention is for the board to recommend it in the absence of a superior offer, the airport operator added.
UniSuper, Sydney Airport’s biggest shareholder with a 15.3% stake, said it was open to rolling that equity into an investment in the privatised company, as required as part of the bid conditions.
“The price represents a very full valuation for the airport, particularly given the uncertain medium-term outlook for international travel,” UniSuper Chief Investment Officer John Pearce said in a statement.
The deal will require an independent expert’s report, approval from 75% of shareholders and a green light from the competition regulator and the Foreign Investment Review Board, in a process that typically takes months to complete.