Auckland Airport shares dive as Dubai goes cold on merger

By NZPA

Friday 31st August 2007

Shares in Auckland International shares Airport opened more than 6% lower today after Dubai Aerospace Enterprise (DAE) appeared to have abandoned a controversial merger-takeover proposal.

AIA shares dived 19 cents to $2.86 on the news although they later recovered to $2.96.

AIA said was told last night by DAE the Dubai company had invoked a clause in the agreed merger plan that would end the agreement.

DAE said recent legal proceedings filed by Air New Zealand seeking a judicial review of AIA's landing charges constituted a "prescribed occurrence" under the terms of the merger agreement.

DAE said if the parties were unable to reach agreement by the end of a five working day consultation period, either party could terminate the merger agreement.

AIA said in its statement it disputed the existence of a "prescribed occurrence", and "does not consider that DAE has grounds to issue such a notice".

State-backed DAE has also claimed that AIA was in material breach of the agreement as it had not used its best endeavours to ensure a successful outcome to the proposal.

AIA also disputed that claim.

Brokers said the announcement effectively ended Dubai's bid.

"They are clearly looking for a way out," said one, who declined to be identified. "This deal was never going to fly."

He said there were too many disagreements between DAE and AIA and too much political opposition.

AIA, which had earlier said it had received eight possible takeover proposals, said it would keep the market fully informed as soon as further details were available but refused to elaborate on its statement.

The parties would maintain a five working day "radio silence" while they discuss the dispute.

DAE last month offered to spend $2.6 billion in a complex $3.80 per share cash and scrip bid that would have given it between 51 percent and 60% control of AIA.

Last month Air NZ sought a judicial review of Auckland Airport's charges.

The national airline said it would go to the Overseas Investment Commission (OIC) in a bid to stop DAE taking control of AIA.

"The owner of Auckland International Airport Ltd (AIA) should not be linked in any form to an airline, so that there is no possibility of preferential treatment of any kind that would disadvantage any other operator," Air NZ chairman John Palmer said at the time.

The bid stirred much political opposition with critics suggesting AIA was a strategic asset that should not fall into foreign hands.

The bid, recommended by AIA's board in the absence of a superior offer, valued AIA at $5.6 billion.

If successful, the bid would give Dubai Aerospace its first airport in the process of becoming a global airport and aviation services company.

The company was set up last year with $US15b ($NZ19b) -- much of it from government companies -- to help make Dubai a tourism and aviation hub.

NZ First Party leader Winston Peters said he opposed the sale because Auckland's airport was a "plum asset" and it was not in the national interest for it to be sold off.

Green Party co-leader Russel Norman said the bid raised concerns about foreign ownership of strategic assets and the potential for monopoly pricing.

AIA chairman John Maasland said last month up to eight potential bidders had expressed interest. These were understood to include Melbourne airport owner, Australia Pacific Airport, Macquarie Airports and Canada Pension Plan. The latter was said to be close to launching a bid.

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