Is Auckland International Airport set for M & A activity?

Arial map of Auckland Airport infrastructure and some its land holdings.

From the rumour and speculation department comes an as yet unsubstantiated tip that there maybe a foreign interest kicking the tyres again at Auckland international Airport Ltd [AIA.NZX].

Market commentator Arthur Lim has speculated that the target of a mystery foreign group approved to make a $1.3 billion investment in New Zealand last year is likely to be a listed company like AIA given the secret nature of the plan.

"That it is kept so confidential does suggest it is a publicly listed company, Auckland International Airport is certainly a possibility," reckons Arthur.

Is Mr Lim Arthur or Martha about this or does his speculation have merit?

I don't know but the $1.3 billion figure suggested could well be applied to the bluff aluminum smelter, the Warehouse Group Ltd [WHS.NZX] for a part share or perhaps New Zealand Refining Ltd [NZR.NZX].

Lets imagine though that Arthur is correct in his speculation.

Well, what we do know is that two different companies tried to buy all or either part of AIA in 2007, with a Canadian and Dubai backed bid but none of these bids were successful because of political interference from the central government of the day who changed laws to stop bids going through and Auckland Council's who considered that selling their 22.8% combined shareholding in the company was not prudent.

Well, things have changed since then and we have a more business friendly government that is unlikely to object to foreign buyers taking a large chunk of the airport.

The new Auckland council will still object to selling (even in the face of the mounting debt that Len Brown is piling on the city balance sheet) but there is an approximate 60% stake up for grabs if we discount the council stake, and the stakes held by the NZ Super Fund and the Accident Compensation Corporation.

I think if Arthur's speculation has some truth to it then the Airport is indeed in play and what is up for grabs would probably be a minority stake of less than 50% given the obvious political pressures that will still remain, even under a more business flexible National Government.

Any bid by a potential investor would have to consider the airports monopoly position in this market, its great management and its good potential growth as the Asia Pacific region expands and air links get busier.

It is getting ahead of myself but any bid would have to be north of $3.80, a price that I would have turned down had the Dubai bid in 2007 been successful.

AIA shares finished trading at $2.49 last Friday and have had a good run over the last few months, rising by around 9% in a flat overall market. AIA shares had been trading consistently between $2.20 - $2.30 for the majority of 2011 so rumours of mergers and acquisition could well have sparked interest amongst those in the know.



AIA @ Share Investor


Share Investor Q & A: Auckland Airport's Simon Moutter
Auckland Council look set for a Auckland Airport Takeover
Auckland City Council new AIA Policy Doc
Make me an offer I cant refuse: Auckland International Airport Ltd
Long Term View: Auckland International Airport
VIDEO - Simon Moutter on Australian Airport Purchase
Auckland Airport Capital Raising a fair call
Auckland International Airport lands Australian Ports
What Infratil sale of Auckland Airport stake means
Is another Auckland Airport bid likely under a business friendly Government?
Latest Airport coverage
Cullen's move on Auckland Airport has far reaching effects
Cullen's move on AIA tax plan Anti-Business
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?


Queenstown Airport Buyout @ Share Investor

Queenstown Airport: Queenstown Airport Update
Auckland Airport CEO on Queenstown Airport Fracas
Queenstown Airport: Court Case looks set to Drag
Queenstown Airport: Loud Voices & Loyalty
Queenstown Airport: Air New Zealand's Crocodile Tears
Queenstown Airport: AIA purchase good Long-Term but will cost shareholders Short-Term

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Download AIA Company Reports


Steve Jobs Biography - By Walter Isaacson



c Share Investor 2012

Is another Auckland Airport bid likely under a business friendly Government?

Update: Read January 2012 rumour about Airport takeover 

Is Auckland International Airport set for M & A activity?

Its time for some not so idle speculation.

With the new National Government in place and the current relaxing of the rules around the RMA, the major planning law that has stopped economic development of New Zealand, we could expect to see developments in other areas of business in regards to relaxing laws and legislation to allow business to flow quicker and therefore more efficiently and more profitably.

A case in point that I would like to regurgitate is the fiasco that ended last year when it was vetoed by the then Labour administration, after over a year of political wrangling, the Auckland International Airport [AIA.NZ] sale saga.

Two suitors were vying for a slice of New Zealand's largest airport, first Dubai Aerospace Enterprise (DAE), then the Canadian Pension Plan Investment Board (CPPIB).

Both these bids eventually failed.

Both DAE and CPPIB were knocked back for no other than petty political reasons.

After these two bids failed Lloyd Morrison, through his company Infratil [IFT.NZ] and a partnership with the NZ Super Fund, accumulated around 9% of AIA.

Morrison also owns a majority stake in Wellington Airport and was behind a failed proposal to build a second airport in Auckland.

The thing is, since the relaxing of relevant business legislation one might expect the National Government's attitude to allowing private enterprise to do business freely, therefore opening up the possibility of another bid for the Airport-either by one or both of the spurned suitors or from Infratil.

The only impediment is the obvious funding problems now that credit is difficult to obtain.

However, The one most likely to bid would be DAE, because it is backed by massive oil derived financial backing and because Auckland Airport would be strategic to its global plans to expand its infrastructure.

It is interesting to speculate and this scenario isn't that far fetched.

AIA shares have added around 10% over the last few weeks.


Disclosure: I own AIA shares

AIA @ Share Investor

Is Auckland International Airport set for M & A activity?
Share Investor Q & A: Auckland Airport's Simon Moutter
Auckland Council look set for a Auckland Airport Takeover
Auckland City Council new AIA Policy Doc
Make me an offer I cant refuse: Auckland International Airport Ltd
Long Term View: Auckland International Airport
VIDEO - Simon Moutter on Australian Airport Purchase
Auckland Airport Capital Raising a fair call
Auckland International Airport lands Australian Ports
What Infratil sale of Auckland Airport stake means
Is another Auckland Airport bid likely under a business friendly Government?
Latest Airport coverage
Cullen's move on Auckland Airport has far reaching effects
Cullen's move on AIA tax plan Anti-Business
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?


Queenstown Airport Buyout @ Share Investor

Queenstown Airport: Queenstown Airport Update
Auckland Airport CEO on Queenstown Airport Fracas
Queenstown Airport: Court Case looks set to Drag
Queenstown Airport: Loud Voices & Loyalty
Queenstown Airport: Air New Zealand's Crocodile Tears
Queenstown Airport: AIA purchase good Long-Term but will cost shareholders Short-Term

Discuss this Stock @ Share Investor Forum - Register free
Download AIA Company Reports

Think Bigger: How to Raise Your Expectations and Achieve Everything
By Michael Hill

c Share Investor 2009

MARKETWIRE: CPPIB reaction to Auckland Airport veto

CPP Investment Board

Apr 10, 2008 17:22 ET

NZ Herald's Auckland Airport merger coverage to date

The Battle for the Airport

Share Investor merger coverage to date

Auckland airport deal vetoed by NZ Govt
Latest Airport coverage
Cullen's move on Auckland Airport has far reaching effects
Cullen's move on AIA tax plan Anti-Business
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Statement From CPP Investment Board Following Government's Decision on Overseas Investment Act Application

AUCKLAND, NEW ZEALAND--(Marketwire - April 11, 2008) - The Canada Pension Plan Investment Board (CPPIB) today said it was disappointed in the outcome of its Overseas Investment Act application, which has been declined.

CPPIB's partial takeover offer for Auckland International Airport required CPPIB's Overseas Investment Act application to be approved in order for the offer to become unconditional.

The offer received the necessary levels of shareholder acceptance and approvals.

CPPIB's Vice-President - Head of Infrastructure, Graeme Bevans, said: "We are naturally very disappointed in the outcome.

CPPIB appreciates the support we have received from the 29,000 largely New Zealand, Auckland International Airport shareholders who accepted our offer."

Under the terms of the offer, the offer will now lapse. Shareholders who accepted the offer are now free to deal with their holdings as they wish.

About CPP Investment Board:

The CPP Investment Board invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries. As at December 31, 2007, the CPP Fund was C$119.4 billion (NZ$148.7 billion) of which C$2.5 billion (NZ$3.1 billion) represents infrastructure investments. In order to build a diversified portfolio of CPP assets, the CPP Investment Board is investing in publicly-traded stocks, private equities, real estate, inflation-linked bonds, infrastructure and fixed income.

Based in Toronto, the CPP Investment Board is governed and managed independently of the Canada Pension Plan and at arm's length from governments.

UBS has acted as financial advisor and Bell Gully has acted as legal advisor to CPPIB.

For more information, please contact

In Canada:
CPP Investment Board
Joel Kranc
(416) 874-5163
Email: jkranc@cppib.ca
Website: www.cppib.ca

or

In New Zealand:
Consultus
Coran Lill
+64 27 600 8602
Email: clill@consultus.co.nz

Click here to see all recent news from this company

STUFF.co.nz: Auckland Airport all go for sale

LATEST: Shareholders have voted in favour of the $1.8 billion partial takeover of Auckland International Airport by a Canadian state pension fund.

By the close of the offer at 5pm yesterday, shareholders holding 79.7 percent of the company had voted on the bid, with 57.7 percent of those voting approving the offer, the airport said today.

A majority of shareholders voting needed to back the offer for it to go ahead.

Share acceptances had reached 62.4 per cent by 5pm yesterday when the bid closed. On Wednesday they had been at 37.8 per cent.

Six per cent shareholder Guardians of the New Zealand Superannuation Fund was among those accepting.

As shareholders swung in behind the bid, the focus has switched to whether the Government will approve the deal, after the Canadian Pension Plan Investment Board's concession over its $3.60a-share offer for a 40 per cent stake in the airport company.

It is a swift turnaround for a bid that looked dead in the water only a week ago after the Government closed a tax loophole and tightened foreign investment rules.

A turning point came on Tuesday when 3.3 per cent shareholder and utilities investor Infratil, seen as a barometer of sentiment, said it would sell.

Shares in the airport, a top-10 company that controls 70 per cent of New Zealand's international air traffic, jumped 35 cents yesterday to end at $2.54.

In addition to gaining 40 per cent of shares, the Canadian fund needed to gain approval from a majority of voting shareholders.

The harshest blow to the bid came on March 4, when Auckland Airport shares plunged 20 per cent after the Government said it would tighten rules to prevent overseas investors gaining control of so-called sensitive assets.

That followed a February 26 move preventing companies from offering tax-deductible payments.

This had formed a key part of a capital restructuring proposal by the pension fund if its partial bid succeeds.

However, this week the Canadian pension fund said it would voluntarily restrict its voting rights to 24.9 per cent in a bid to calm Government worries about foreign ownership of key assets.

The Government's move was seen by many as politically motivated.

One analyst said: "The Government doesn't give a damn about the economic ramifications, this is all about getting votes."

The Overseas Investment Office said it would refer the bid to Land Information Minister David Parker and Associate Finance Minister Clayton Cosgrove.

- with REUTERS

Share Investor AIA merger coverage to date

Auckland Airport Update
Latest AIA developments
Cullen's move on Auckland Airport has far reaching effects
Cullen's move on AIA tax plan Anti-Business
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Disclosure: I own AIA shares

c Share Investor 2008

Auckland Airport merger update

The Battle for the Airport

The ongoing debate over ownership of Auckland
International Airport, the gateway to New Zealand. More
Auckland City Council vote against AIA sale - Sydney Morning Herald
Canadians near bid for AIA - Stuff.co.nz
Infratil: Morrison played no part in AIA share decision-NBR
Infratil says yes to Canadians - Stuff.co.nz
Fran O'Sullivan: Canadians losing their bite - NZ Herald


The CPPIB will get the 40% of acceptances by 5.00pm Thursday(NZ time) But the
Labour government look set to stop the deal anyway.


There have been further developments in the Auckland International Airport(AIA) merger saga today.

Since the last report here though, Infratil, a 3% holder has decided to approve the merger and as of today, after market closing at 5.00pm, The Canadian Pension Plan Investment Board has 38.7% acceptances and its a gnats whisker away from the required 39.53% needed by tomorrow.

Although largely immaterial, given the overwhelming acceptances already, Auckland City Council has voted just 30 mins ago(8.20pm NZ time) not to sell their 12.7% stake and vote against the merger going ahead.

Clearly the move last week by Micheal Cullen to retrospectively stop the deal by changing a law has backfired on him and CPPIB will pass the acceptance mark with flying colours.

Cullen will likely stop the deal anyway he can because he thinks there are votes to be had, so the positive outcome for the Canadians is going to end ultimately end in tears for them.


Share Investor AIA merger coverage to date


Latest AIA developments
Cullen's move on Auckland Airport has far reaching effects
Cullen's move on AIA tax plan Anti-Business
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Disc: I own AIA shares



c Share Investor 2008

Latest Auckland International Airport developments

There have been further developments today over the Auckland International Airport(AIA) sale to the Canadian Pension Plan Investment Board(CPPIB).

CPPIB have decided to lower their voting rights on a merged board.

I have added my acceptance votes for a merger.

Full NZX release here

Related media on today's developments

Stuff.co.nz
NZ Herald

Herald's Auckland Airport merger coverage to date

The Battle for the Airport

Share Investor merger coverage to date

Cullen's move on Auckland Airport has far reaching effects
Cullen's move on AIA tax plan Anti-Business
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Disclosure: I own AIA shares

Links c Share Investor 2008

Bruce Sheppard: Another Asset Theft

Bruce Sheppard is a non-politically correct agent
provocateur and founder of the New Zealand
Shareholders' Association. An accountant by
profession, he is passionate about New Zealand
but has no hesitation in exposing its shortcomings.
He is regularly sighted tackling Auckland's traffic
armed only with a bicycle.



Bruce Sheppard in Stirring the Pot from Stuff.co.nz| 1:26 pm 4 March 2008

This government thinks it is OK to interfere in the private property rights of its citizens, and dresses this up as the protection of the national interest. Last year Telecom got dealt to, this year it is Auckland Airport, next year who will it be?

While I had little empathy with the Canadian bid and was not going to vote in favour of it with my shares, I will now support a yes vote and an acceptance. Then I will let the Government tell 10’s of thousands of New Zealanders that they can’t have their money.

As far as the NZ control/ ownership issue is concerned the horse bolted years ago. Auckland International Airport is already over 40 per cent foreign owned. Who cares if it is a selection of hedge funds or a Canadian pension fund if it is just about ownership? Frankly a pension fund is better as at least they will take a long-term view , hedge funds just look for the next quick profit fix.

If it is control, then not much changes. The Canadians have guaranteed that the board will have enough independent directors to remain an independently governed company still listed in NZ.

What is more important here is the crown interference. What this does is undermine the effectiveness of our capital markets and it also increases the risk of investing in NZ if you are a foreigner. Obviously the repricing of risk internationally is having an effect on our sharemarket and this sort of short sighted nonsense from our politicians will simply make matters worse.

If you want to fix foreign ownership of NZ Inc, you have to encourage Kiwis to own NZ instead. To do this our people have to stop spending $1.14 for every dollar they earn. It is not rocket science, the 14c is funded with debt or asset sales. Now why would a New Zealander who is saving, invest in NZ when the Government appropriates economic advantages on one ill-conceived whim or another? Much easier to invest offshore out of Michael Cullen’s sticky, thieving hands.

Related Share Investor reading

Cullen's move on Airport has far reaching effects
Fran O'Sullivan: Cullen's shock move hinders Airport bid
Cullen's move on AIA tax plan Anti-Business
NZ Herald: Airport Deal not so sweet after tax break blocked
NZX Press Release: AIA directors recommend shareholders sell
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Disclosure: I own AIA shares

Links c Share Investor 2008

Cullen's move on Auckland Airport has far reaching effects

A cynical move by Michael Cullen to gain votes in the 2008 Election by
blocking an Auckland Airport sale will have far reaching effects.

The Battle for the Airport-NZ Herald

Latest Airport News:

• Key accused of being 'slippery' over Auckland Airport
• Cullen's shock move hinders airport bid
• Canadian's push on regardless of Cullen move
  

Michael Cullen's move today to put a stop to a partial sale of Auckland International Airport(AIA) to the Canadian Pension Plan Investment Board(CPPIB) has more far reaching effects than putting the brakes on this deal.

Below is the piece of legislation that has been changed, in relation to the airport merger, and it is sufficiently vague enough to cause major uncertainty, for investors, domestic and international, and business in New Zealand.

"Whether the overseas investment will, or is likely to, assist New Zealand to maintain New Zealand control of strategically important infrastructure on sensitive land."

Who decides what is "strategically important" and on what basis do they apply the new legislation?

Is the Warehouse(WHS) a strategic asset?

Business and investors need certainty, you only have to look at current market conditions to figure that out, and the new legislation leaves everyone guessing.

This uncertainty, apart from the retrospective legislation passed today, and mooted tax changes, means that foreign investors will be thinking twice before looking at putting their capital in a country that treats foreign investors like Putin's communist Russia treated foreign oil companies over the last few years.

It also means that private property rights don't mean anything in this country anymore(just like in Putin's Russia) and with the stroke of a retrospective pen your property isn't really yours anymore.

I own Auckland Airport shares, they belong to me and nobody else and in a free country I should be able to do what the hell I want to do with them.

Contrary to Labour party spin the Airport isn't a state asset, it is privately owned, by many individual Kiwis and and some bigger institutions and the playing of the "we cant sell such a "strategic asset to a foreign buyer" card makes no sense because it is already owned by 40% of off shore investors.

It seems to me that Labour playing this card in election year will be appealing to the paranoia of those people who think the National party are going to sell "strategic assets" and Labour will try to get votes from it.

Cullen mentioned that other countries have similar laws to prevent strategic assets from "going overseas"-although you would have to have pretty big container to fit the Airport into it and ship it off- they may well do or not but their laws were in in place before any important deals were being negotiated and to change conditions of a deal as it is being done is like playing the shell game with a blindfold while on crack.

The immediate affects of Cullen's finger in your pie has been enormous. Billions of dollars have been lost from the capital value of Auckland Airport and therefore shareholder's pockets. The NZX's other companies plunged in value today because of the uncertainty that Cullen's pen stroke brought to the market.

Other companies who may be deemed "strategic" by Cullen and his communist misfits will be wringing their hands in the hope they wont be next. The listed power companies, ports and others will clearly be affected.

The interest still in the wings by Australia's Origin Energy for its sister company Contact Energy(CEN) would seriously be in doubt under the new criteria. Similarly other foreign companies will consider our country's barriers too hard to negotiate. Takeovers and mergers, an essential part of successful capitalism, will prove too cumbersome to consider.

As I have canvassed before in previous articles, Cullen's move now appears to be arrogant in the extreme. His party and lapdogs in crime, Winston "Baubles" Peter's NZ First, made their feelings clear when takeover talks were mooted with Dubai Aerospace Enterprise almost 9 months ago and they were staunchly against any sale.

To move now is unlawful(it was but they will change that law) immoral and is a clumsy attempt at gaining votes from voters who think capitalism is a dangerous thing.

The cost to CPPIB and Auckland Airport shareholders has been many millions-on top of the couple of billion in lost capital for Auckland Airport shareholders.

I have been a very impassioned advocate for not selling my shares over the last 9 months, because I could see the investment as a good long term one.

I was tempted, when news first broke of a sale all those months ago, to sell at the market price that day of around NZ$3.65 but decided not to. Now I think those people who sold were wise beyond any education one could buy.

Given the interference over the last few weeks I am now going to give two ticks for the deal, it may send a message to Labour what the real owners of this asset want to do with their property but I doubt whether Cullen will listen or care.

I know this deal isn't going to happen and have said so for many months now but the interference by politicians in private property issues has me questioning my holding in such a company mired in political dead weight and sticky fingers.

I sold my Port of Tauranga shares a few years back because I couldn't contend with local Auckland politicians and Winston Peters(again) interfering in merger proposals with Ports of Auckland. That deal was ended after months of expense for Port of Tauranga.

Business needs certainty in New Zealand, especially now as the proverbial is hitting the fan hard.

That means overseas investment is needed. Today's approach by by the extreme left wing business haters in Labour and NZ First has been another nail in the coffin for NZ INC because that much needed capital is going to dry up.

The move today is reminiscent of a much troubled National Government, led by Robert Muldoon, who in its final months, regulated and nationalised the life out of our economy and then went on to lose an election in 1984 in spectacular fashion.

Ironically it was Labour who then swept into power and with the wise direction from Roger Douglas transformed the economy into a far more sustainable one.

Sadly Douglas was stopped before he was finished, by the very same people who have foisted the current heavy burden on our economy today.

Only fools don't learn from history and surely Cullen, a Dr of History himself(not in business or economics) shouldn't be as foolish as he has been over the last few weeks.

We surely cant afford a repeat.

Related Share Investor reading

Fran O'Sullivan: Cullen's shock move hinders Airport bid
Cullen's move on AIA tax plan Anti-Business
NZ Herald: Airport Deal not so sweet after tax break blocked
NZX Press Release: AIA directors recommend shareholders sell
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Disclosure: I own AIA shares

Share Investor 2008

Fran O' Sullivan: Cullen's shock move hinders airport bid

5:00AM Tuesday March 04, 2008
By Fran O'Sullivan

Finance Minister Michael Cullen

*Commentary from Share Investor to come-Why I'm going to sell.

NZ Herald-The Battle for the Airport

The Government has urgently toughened New Zealand's overseas investment rules, putting a new hurdle in the way of the controversial Canadian pension fund's bid for a 40 per cent stake in Auckland Airport.

The unexpected move comes just one week after the Government announced it would legislate against a multimillion-dollar tax break that the Canadian Pension Plan Investment Board planned to use to extract greater returns from the airport.

Finance Minister Michael Cullen said greater protection for New Zealand's major strategic assets will be delivered under an order-in-council requiring Cabinet ministers to take into account New Zealand control factors when considering overseas investment applications affecting a very narrow range of strategically important assets.

Dr Cullen said yesterday's changes had been made in response to the uncertainty and debate that had emerged surrounding the Canadian offer to Auckland Airport shareholders.

"There has been a high degree of public debate about handing over control of New Zealand's main gateway to the world to foreign interests.

"The Canadian Pension Plan bid was always going to require consideration under the Overseas Investment Act and there has been speculation that ministers would use existing conditions under the act to reject the offer. The Government's move today is to be clear about the fact that New Zealand control factors will be taken into account as part of the national interest tests to be applied under the act."

The Auckland Airport board has been strongly opposed to the Canadian bid, taking the view the strategic asset should stay under New Zealand control. Chairman Tony Frankham has personally briefed Prime Minister Helen Clark on critical board decisions ahead of shareholders.

The Canadian fund has to achieve acceptances from 40 per cent of shareholders for its offer of $3.655 a share by the March 13 closing date.

Fifty per cent of shareholders who take part in a separate vote must give their approval for the bid to proceed.

The Overseas Investment Office must then approve the Canadians' application by April 30, or it will lapse.

The Government's unexpected move yesterday came as a shock to the Canadian fund's lawyers last night.

Dr Cullen said the change would allow greater protection for New Zealand's strategic assets and would bring the country into line with the likes of Australia, which restricts the ownership of airports.

An order-in-council was passed to insert a new clause in the regulations requiring ministers to consider "whether the overseas investment will, or is likely to, maintain New Zealand control of strategically important infrastructure on sensitive land".

Dr Cullen emphasised the ministers considering the bid - Associate Finance Minister Clayton Cosgrove and Land Information Minister David Parker - had not played any part in discussions over the new regulation.

He also said nothing about an acceptance of any Overseas Investment application.

"New Zealand already has foreign ownership restrictions on Telecom and Air New Zealand. This process has moved quickly to provide maximum certainty to markets regarding the Government's intentions."

EXTRA HURDLE
The Overseas Investment Office must now consider:

"Whether the overseas investment will, or is likely to, assist New Zealand to maintain New Zealand control of strategically important infrastructure on sensitive land."

Related Share Investor reading

Cullen's move on AIA tax plan Anti-Business
NZ Herald: Airport Deal not so sweet after tax break blocked
NZX Press Release: AIA directors recommend shareholders sell
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Disclosure: I own AIA shares

Share Investor 2008

Cullen's move on Auckland Airport Tax plan anti-business

Stand back because I'm gunna blow!!!




Michael Cullen's retrospective tax changes over the AIA sale
effectively removes shareholders property rights

Additional reading on this story - direct links to article

Stuff
NBR
Radio New Zealand
Bloomberg
Southland Times



The arrogance, the stupidity, lack of moral and legal right and communist sort of garbage Michael Cullen is up to by retrospectively changing tax law to grab even more of New Zealand citizens and Auckland International Airport(AIA) shareholders money from them is not surprising, because we saw it in 2006 when the Labour government changed law in hindsight to make the theft of taxpayer money by them legal.

What is surprising is that Cullen and his mates around the cabinet table haven figured out or don't care about( I suspect they just couldn't give a hoot) the repercussions of their move: for business as a whole in the future, individuals and specifically the 50000 odd New Zealanders with shares in the airport-especially in an election year! Its just mind boggling.

We all know Cullen and his socialist mates hate private property rights and clearly business because here he is again stomping his little legislative pen and clipboard all over these rights.

That is, people have a property right in the shares they own in the airport and they have a right to sell them to whomever they wish, under the current tax laws which exist. Retrospectively changing the tax laws just because you can isn't a sensible way to oversee business because business needs to be able to function with surety of the current laws in which they trade under. They no longer have that in this respect.

By becoming involved in a transaction between its private citizens in this way the Labour Party have effectively wasted the time of all the parties involved. CPPIB , Auckland Airport and the shareholders involved.

Millions of dollars have also been flushed down the bog, because it costs to do these large deals. In this case it has cost shareholders like me money. Lots of it.

The interfering has wiped hundreds of millions from the capital value of the airport- down 13.5% or 38c to NZ$2.45- and therefore shareholders wealth and given notice to other overseas companies thinking about buying businesses in New Zealand to think again-if the government doesn't want it sold they will simply regulate in some way to stop it. It isn't your business anymore if you don't have the ultimate say about what happens to it.

Now investors know that Cullen and his minor party supporters have been against this sale from the beginning, almost 1 year ago. Winston "baubles" Peters has spoken about this many times and so has Cullen, Both early in the sale saga.

My question to Cullen is then, if you were against this sale from the beginning then why didn't you move to stop it at its inception? He certainly knew about the "tax issues" with the airport amalgamation but chose to sit on this harebrained half arsed intention till the very last minute.

He has also been aware that the announcement made today would have been consequential to the sharemarket value of AIA and has kept it secret from the NZX, CEO Mark Weldon's office and therefore the shareholders invested in AIA, and so should have informed the market alot sooner and alot less clumsier than he has.

I wonder if Weldon will be giving the minister a "please explain" letter? Doubt it.

The Canadian Pension Plan Investment board say they will "push on" with the deal and were aware of IRD approval when making their bid. I'm sure they didn't factor in todays turbulence though.

Finally, pissing off 50000 mums and dads when you have been nuked in the polls, your leader is melting down, and in an election year just isn't very bright.


Related Share Investor reading

NZ Herald: Airport Deal not so sweet after tax break blocked
NZX Press Release: AIA directors recommend shareholders sell
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Disclosure: I own AIA shares

Share Investor 2008

NZ Herald: Airport deal not so sweet after tax break blocked

Canadians bidding for 40 per cent of Auckland Airport had offered a type of share that would yield tax breaks.

Additional media coverage of this story - Direct links to story

Stuff
NBR
Radio New Zealand

Opinion piece from Share Investor at end of the day.

By Grant Bradley , 26.02.08, NZ Herald

A multi-million-dollar tax break that would have sweetened a Canadian pension fund's bid for control of Auckland International Airport(AIA) was blocked in a surprise move by the Government last night.

The urgent measure relates to what are known as stapled securities, which allow companies to pay tax-deductible interest to shareholders instead of dividends.

Changes will be retrospective and the announcement was made without prior consultation with interested parties "because it is a matter of urgency since some companies may be contemplating the issue of the type of stapled stock in question", Finance Minister Michael Cullen and Revenue Minister Peter Dunne said.

The Canada Pension Plan and Investment Board (CPPIB) planned to issue stapled securities as a "tax-efficient" device as part of its offer to airport shareholders.

The Inland Revenue Department says hundreds of millions of dollars could have been caught up in the deals if the securities had become popular.

Policy manager Emma Grigg said the Canadian proposal had not been specifically targeted but plans outlined in the company's prospectus would be covered by the changes.

The CPPIB had early yesterday been talking up the chances of its bid succeeding after a change of tack by the airport board. Last night, it said it would not respond to the tax change announcement until today.

The ministers said the change would be included in the next available taxation bill and, once enacted, would apply to stapled stock issued or stapled on or after yesterday.

"If those instruments were to become common in New Zealand the amount of debt deductions against our tax base could increase significantly. The issue becomes particularly acute if the instruments are issued to foreign investors in New Zealand companies."

The change will also deal a blow to potential earnings for Auckland councils. Auckland City Council has a 13 per cent stake in the airport and Manukau City has just over 10 per cent. Although neither is selling its shares, both were hoping to gain tens of millions of dollars a year.

A market source said "anyone who thought they were voting for this to get a tax advantage should think again".

Paul Ridley-Smith of investment company Infratil, which opposed the Canadian bid, said it looked like it was back to the drawing board for CPPIB. It has undertaken to restructure the company by way of an amalgamation process - to unlock capital and make it more tax-efficient for shareholders.

"If the Canadian deal had been done as a single transaction - which is to bring in a new shareholder, new management and change the capital structure - we had absolutely no problem," he said.

"But with the Canadian deal the restructure happens after they've got to 40 per cent. So the question has got to be asked what is the overriding commercial purpose of the amalgamation. If it is predominantly to get a tax benefit, then we would think it wasn't going to get approval from Inland Revenue."

The CPPIB had not sought an IRD ruling on the amalgamation plan before making its offer.

Prior to the ministers' announcement yesterday, the airport's board recommended shareholders sell their shares. That was a reversal of its position in December, when it advised shareholders against accepting the partial takeover bid but by a majority of 4-2 maintained its recommendation to vote against the offer.

Board chairman Tony Frankham said directors wanted to ensure nobody missed out on any premium if shareholders voted yes to the offer.

CPPIB vice-president Graeme Bevans said the change of recommendation was "fairly predictable". "They're ... a relatively new board and this is a very difficult decision."

In August last year, Trade Negotiations Minister Phil Goff dealt a fatal blow to a Dubai Aerospace Enterprise takeover bid when he said the Government did not want to see key public utilities sold off.

Shares in Auckland Airport closed up 3c to $2.83 yesterday, off its year high of $3.50 struck in July last year.

Related Share Investor reading

NZX Press Release: AIA directors recommend shareholders sell
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Disclosure: I own AIA shares


Links c Share Investor 2008

NZX press release: AIA directors recommend shareholders sell

Auckland International Airport directors are split on the merger with CPPIB.
Previously they have been recommending shareholders hold their shares.

Media comment:

Board says sell to Canadians
Directors recommend Canadian bid for Airport

Watch Video: Tony Frankham on why he opposes the bid




AIA, 8.57 am NZ time, AIA board recommends shareholders sell

The directors of Auckland Airport today unanimously recommended that shareholders should sell their shares into the takeover offer from the Canada Pension Plan Investment Board (CPPIB) for $3.6555 per share (less the 5.75 cents per share interim dividend to be paid next month ).

However directors are not unanimous on whether shareholders should vote in favour or against CPPIB acquiring up to 40 per cent of the company.

A majority of the Airport board, comprising Tony Frankham, Keith Turner, Lloyd Morrison, and John Brabazon, are maintaining their recommendation for shareholders to vote against CPPIB acquiring 40 per cent of Auckland Airport as they believe the shares in the company are likely to be worth more longer term without CPPIB involvement.

Two directors, Richard Didsbury and Joan Withers, believe that shareholders should vote in favour of the offer as the price offered by CPPIB is unlikely to be available to shareholders in the foreseeable future.

For the transaction to proceed, the Takeovers Code requires a majority of shareholders who vote to approve CPPIB acquiring a 40 per cent stake. If this approval is not gained, the bid cannot proceed, regardless of the number of shares offered for sale.

Chairman of the board, Tony Frankham, said all the directors had carefully considered whether to revise their advice to shareholders on both elements of the transaction in light of the change in financial markets.

"All directors acknowledge that the market conditions have changed significantly since this bid was announced and this key factor has given rise to the need for directors to update their earlier recommendations.

"We all agree that shareholders would be unwise not to realise part of their holding at the favourable partial offer price if the partial offer receives approval to proceed.

"Each director has also carefully considered a wide range of other relevant factors in reaching their own decision in relation to the "voting" element of this bid.

"Directors who continue to recommend that shareholders should object to the takeover are of the view that the long term value of Auckland Airport has not fundamentally changed.

"They regard Auckland Airport as a strategic asset with long term horizons and consider ownership should not be determined by shorter term market fluctuations.

"They believe that over the longer term the value of Auckland Airport shares is likely to be greater without CPPIB having a 40 per cent stake which gives it effective control."

Mr Frankham said those board members have consistently said that the partial offer does not fully reflect the longer term value of Auckland Airport and despite further presentation from CPPIB do not accept that their introduction as a significant minority shareholder will assist the company in any material manner.

"As a result they maintain their view that, when considered on a longer term basis, on balance the CPPIB partial offer is not in the best interests of shareholders."

He said that Richard Didsbury and Joan Withers believe that the price offered by CPPIB to shareholders for some of their shares is unlikely to be available for the foreseeable future.

"They believe that the partial offer of $3.6555 per share (less the 5.75 cents per share interim dividend to be paid next month) is even more attractive today, at a time when shareholders are faced with uncertain global conditions that may continue for some years to come.

"The impact of those conditions does in their view put downward pressure on the valuation of the company and given global economic conditions, a more favourable offer in all aspects is unlikely to be available to shareholders in the near term.

"Therefore on balance, they feel that the certainty of selling 40 per cent of the company for significantly more than its current trading price outweighs the disadvantages of bringing on board a significant minority shareholder without material aeronautical or tourism connections.

"These directors therefore recommend that shareholders vote to approve the offer and sell their shares".

As already advised, the directors consider it is not possible to identify an appropriate party and present an alternative proposal to shareholders before the expiry of the CPPIB bid period on 13 March.

Mr Frankham said that if the CPPIB bid fails, the board will continue to seek a suitable cornerstone shareholder to take a smaller stake in the company however that process may take some time given the current state of financial markets.

"We envisage that it will continue to be challenging to meet all of the variously stated objectives of shareholders in relation to percentage holding, capital restructuring and non dilution of the Council interests," he said.

- ends -

For further information, please contact:
Lucy Powell
Head of Communications
+64 9 256 8866
+64 21 995 710

Footnote:
Auckland Airport has declared a fully imputed interim dividend of 5.75 cents per share payable on 12 March 2008 to shareholders on the register as at 7 March 2008. As the interim dividend will be paid prior to the close of the CPPIB offer, decreasing the equity value of Auckland Airport by an equivalent amount per share, the offer price will be adjusted in accordance with the terns of the takeover offer by the amount of the interim dividend. Accordingly, the offer price will be reduced by 5.75 cents per share from $3.6555 per share to $3.5980 per share. It is expected that the final dividend will be reduced by an amount of 2.00 cents per share, reflecting the increased interim dividend paid to shareholders now.



Related Share Investor reading

AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?

Disclosure: I own AIA shares


Links c Share Investor 2008