Sale at Sydney Airport is one step closer after $ 17.4 million bid improvement

SYDNEY, Sept. 13 (Reuters) – The sale of Australia’s largest airport came close on Monday when a group of infrastructure investors obtained permission to conduct due diligence at Sydney Airport Holdings Pt Ltd ( SYD.AX), after sweetening its acquisition bid to A $ 23.6 billion. ($ 17.4 billion).

The move increased shares of the airport by 5%, and analysts said a rival bid seemed unlikely given the magnitude of funding needed and foreign ownership rules meaning the airport should remain a 51%. % Australian.

“We assign a high probability that an agreement will be successful given the board’s commitment to unanimously recommend the (consortium’s) offer if there is no higher alternative offer,” Credit Suisse analysts said in a note.

Sydney Airport is the only listed airport operator in Australia and a purchase would be a long-term bet for the travel industry that has been battered by the pandemic. The country plans to gradually open its borders once 80% of adults are fully vaccinated, a milestone expected by the end of the year.

A successful takeover would be one of the largest purchases by an Australian company and would highlight a year of stellar activity, which already recorded a mega purchase of $ 29 billion from Afterpay (APT.AX) for Square (SQ.N).

The improved offer of $ 8.75 per share (up 3.6%) follows the consortium’s previous proposals, which stood at A $ 8.45 and A $ 8.25, both of which were rejected by the operator’s board. from the airport to be insufficient. Read more

Shares at Sydney Airport were trading at $ 8.40 on Monday morning, below the bid price, due to the time it will take to complete the transaction, as well as the limited prospects of a bid. rival.

“It seems very unlikely that there will be an alternative candidate,” Jefferies analyst Anthony Moulder said in a note to clients.

The bidding consortium, Sydney Aviation Alliance (SAA), is made up of Australian investors IFM Investors, QSuper and AustralianSuper and Global Infrastructure Partners based in the United States.

Low interest rates have caused pension funds and their investment managers to pursue higher returns. The rest of Australia’s major airports are unlisted and owned by pension funds and infrastructure investors.

SAA has been granted non-exclusive due diligence which 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 council to recommend it in the absence of a higher bid, the airport operator added.

UniSuper, the largest shareholder in Sydney Airport, with a 15.3% stake, said it was open to converting this equity into an investment in the privatized company, as required as part of the terms of the the offer.

“The price represents a very comprehensive valuation for the airport, especially given the uncertain medium-term outlook for international travel,” John Pearce, investment director at UniSuper, said in a statement.

The agreement will require a report from independent experts, the approval of 75% of shareholders and a green light from the competition regulator and the Foreign Investment Review Committee, in a process that normally takes months to complete. se.

Jamie Hanna, VanEck’s deputy director of investments, said he believed SAA would consider increasing its offer after examining the airport’s books given the improved travel prospects.

An SAA spokesman said the consortium welcomed the announcement and hoped to work with the Sydney airport board to finalize the transaction.

(1 $ = 1.3587 Australian dollars)

Report by Jamie Freed and Paulina Duran; edition by Diane Craft and Richard Pullin

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