Canadian Pension makes formal offer for Auckland Airport

By NZPA

Friday 16th November 2007

Canada Pension Plan Investment Board (CPP) today submitted its formal bid for 39.53% of Auckland International Airport (AIA) at $3.6555 (correct) per share cash.

The offer through its subsidiary, NZ Airport, values AIA at $4.45 billion.

It is a similar proposal to the one rejected by the board as too risky as it would triple AIA's debt.

NZ Airport already owns 9.5m AIA shares, and with these would would own 40% of the company. The offer closes on March 13.

AIA shares closed yesterday at $3.04.

Some institutions indicated the CPP bid would be well received but Infratil, which with The NZ Superannuation Fund has an 8% stake, strongly opposes the bid as too low for one that effectively gives it control.

CPP said it resubmitted its proposal as a result of lobbying by larger shareholders.

It is unclear whether the proposal will be discussed at the AIA shareholder meeting on Tuesday. The bid will not be on the agenda and can only be raised as general business or at chairman John Maasland's discretion.

As well as concerns about increasing risk by raising debt levels, Maasland criticised CPP as bringing little to the table in terms of airport management and airline connections.

But CPP disputes this, saying it has wide experience in airport management while the fund with $C120.5 billion ($NZ170b) in assets had many connections in the aerospace industry.

If it succeeds, CPP wants to restructure AIA and increases its gearing ratio. It accuses AIA of having an inefficient capital structure by running its gearing ratio too conservatively.

Auckland City, which owns 12.75% and Manukau City, which owns 10.5%, each have said they will not sell their stakes.

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