SYDNEY, Australia (Reuters) – Sydney Airport Holdings Pty Ltd announced on Thursday that it will reject a buyout offer of A$22.26 billion ($16.6 billion) from a group of infrastructure firms, the largest of a flurry of Australian acquisitions in response to record-low interest rates. The operator of Australia’s busiest airport said its board of directors unanimously agreed that the plan undervalued the airport and was not in shareholders’ best interests. It would have been one of Australia’s largest buyouts if it had been successful. Due to historically low interest rates, pension funds and their investment managers have been chasing greater yields, which has resulted in recent asset purchases from Telstra Corp and Qube Holdings. After media claims that it had received a buyout offer, Spark Infrastructure Group, which has a market value of $3.2 billion, went into a trading standstill on Wednesday. The Sydney Aviation Alliance, which includes IFM Investors, QSuper, and Global Infrastructure Partners, made an offer of A$8.25 per share last week, a 42 percent premium to the latest trading price of Sydney Airport before the offer was made. Before the plan was rejected, the airport’s shares ended at A$7.80 on Wednesday, amid concern over whether the board would approve the proposal, which was contingent on its recommendation. On Thursday, the business acknowledged that its stock would likely trade below the consortium’s indicated price in the short term, but said it would only pursue a change of control deal that would “provide and recognize sufficient long-term value.” A request for comment from the Sydney Aviation Alliance was not immediately returned. Foreign ownership of airport operators is restricted to 49 percent by the Australian government. Global Infrastructure Partners is based in the United States, whereas IFM, QSuper, and UniSuper are Australian investors. According to Jefferies analyst Anthony Moulder, the bid was a strong start but did not provide a sufficient takeover premium to the existing fair value. Sydney Airport is Australia’s sole publicly traded airport, and acquiring it would be a long-term investment in the travel industry. After an increase in COVID-19 cases, the city is currently on lockdown for at least two more weeks. If the purchase goes through, it will be owned by consortia of infrastructure investors, largely pension funds, like the country’s other major airports. According to the Association of Superannuation Funds of Australia, Australia’s mandated retirement savings system, known as superannuation, has assets worth A$3.1 trillion. When borders reopen and travel demand recovers, a $30 billion acquisition of Sydney Airport, including debt, would allow them to reap financial rewards. If completed, the deal would be one of the country’s largest in terms of enterprise value in US dollars, on par with Unibail-$22 Rodamco’s billion purchase of mall operator Westfield Group in 2017, according to Refinitiv data. Bloomberg News reported last week, citing unnamed sources, that a group led by Macquarie Group was considering a competing offer. According to the source, talks are still in the early stages, and Macquarie may explore joining the Sydney Aviation Alliance./n
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