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On October 25, 2017, passengers walk with their luggage towards the departure gates at Sydney International Airport in Australia. FILE PHOTO: REUTERS/Steven Saphore (Reuters) – SYDNEY, July 15 (Reuters) – Sydney Airport Holdings Pty Ltd (SYD.AX) 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 prompted by 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 (TLS.AX) and Qube Holdings (QUB.AX). find out more Spark Infrastructure Group (SKI.AX), a provider of electricity poles and lines, announced on Thursday that it has received a A$4.91 billion acquisition offer from private equity firm KKR & Co Inc (KKR.N) and the Ontario Teachers’ Pension Plan Board. 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. find out more On Thursday, Sydney Airport shares were steady in early trade at roughly A$7.80, indicating that the market expects the parties to continue negotiating. The plan is subject to board approval and access to due diligence. Only a buyout transaction that “delivers and recognizes adequate long-term value” would be acceptable to Sydney Airport’s board. “The board is definitely attempting to play hardball,” Andy Forster, a portfolio manager at Argo Investments, a top-20 investor in the airport, told Reuters. “But we do think it’s a really unusual long-dated asset, so we are supportive of their choice so far.” 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. 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. find out more 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. A $30 billion purchase of Sydney Airport, including debt, would put them in a position to profit financially once borders reopen. If completed, the deal would be one of Australia’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. The Foreign Investment Review Board and Australia’s competition regulator would have to approve it. Cross-ownership laws may force IFM to sell down a portion of its investments in other major Australian airports, Morgan Stanley analyst Rob Koh said at a CAPA Centre for Aviation event on Wednesday. “It’s possible that this would lead to a succession of more airport deals,” Koh said, adding that co-owners with pre-emptive rights would be obvious purchasers. Bloomberg News reported last week, citing unnamed sources, that a consortium led by Macquarie Group (MQG.AX) 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. find out more (1 Australian dollar = 1.3407 dollars) Jamie Freed and Paulina Duran contributed reporting, while Stephen Coates edited the piece. The Thomson Reuters Trust Principles are our standards./nRead More

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