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.
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.
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.
The long winded takeover saga that is Auckland International Airport [AIA.NZ] coming up to one year in July, rolls on with a further possible development revealed today.
Early March: Auckland City Council votes on its response to CPPIB offer March 6: Deadline for Auckland airport board to review its objection March 13: CPPIB offer deadline for shareholders
According to the AIA board:
"The market has changed significantly since December so we have an obligation to review our recommendation. The board considers that it has a responsibility to whether the reconfirm its recommendation or otherwise."
Its only a suggestion that the board will take into account negative "market conditions" but it is curious to me why the board would waiver on their previous uncompromising stance that they wouldn't support a bid by the Canadian Pension Plan Investment Board(CPPIB) for an almost 40% share of the Airport company.
It seems short sighted, to say the least that the AIA board might backtrack on previous statements around the long-term value of the company and now even consider lightly the short term vagaries of global markets.
That idea should be dismissed forthwith and any recommendation to sell or hold should be made by shareholders in the company as to whether they would want to part with this asset.
Both Auckland and Manukau City Councils have said they wouldnt sell their shares but Auckland remains open to supporting the partial takeover on which they will vote on soon.
The outcome still remains up in the air but institutions must be pressuring the likes of the Councils to approve a partial takeover given their partiality to cut and run and take short term profits.
I will stick my neck out and pick it will fail, because the deal seems too complex and local council political egos are involved. Much like the failed merger of Port of Tauranga(POT) and Port of Auckland last year.
News today that the directors of Auckland International Airport Ltd [AIA.NZX] have advised AIA shareholders to reject the Canada Pension Plan Investment Board offer of NZ$3.66 per share as too low and that the share price doesn't take in to account future growth and potential for the port in this part of the world comes as no surprise.
The independent valuation by Grant Samuels though indicates that the offer price by CPPIB is above their valuation of $3.48 at the high side and recommends to AIA shareholders that the offer is a good one.
AIA management, in the event of the CPPIB bid crashing and burning, will actively seek "a cornerstone holder" with "airport experience" smacks of nepotism to me as one of the largest AIA shareholders with a seat on the board, is Lloyd Morrison, head of Intratil, a majority owner of Wellington Airport, with small airports in Europe and Britain.
It seems that with the certain failure of Morrison's company trying to develop a second Auckland Airport in West Auckland, he now seems intent on getting a foothold in what would have been his competition had his bid for a second port was successful.
So what is the Auckland International Airport worth?
It depends on your investment horizon. Are you invested short or long term?
If you are a short term investor who bought your shares last year for as low as $1.90, then you might be wise to accept the CCPIB offer and lock in an exceptional quick buck.
The inverse long term view of course is that within 5 years the value of a single AIA share is likely to be well in excess of the $3.65 offer from the canny Canadians. They can definitely see a good long term prospect, otherwise they wouldn't now be having a second go at the company.
Lets face it, the company is a near monopoly, with the worlds best profit margins for an airport and also a huge owner of undeveloped land and various other revenue streams or businesses outside its core reason for existence.
It is in effect also a mall operator, with a large retail presence and big foot traffic coming past on a 24 hr 7 day week basis and also operates a large car parking facility as part of the airport.
Its pretty basic, you can either accept the offer partially or fully for your shares and vote accordingly for CPPIB to take just shy of a 40% stake in AIA and for a NZ$3.6555c cash consideration.
Seems allot lower value than some have put on the company but it is a reasonable advance on the current share price of $2.80.
Brook Asset Management and other broker institutions look likely to back the offer but the two large council owned parcels of shares and those of Lloyd Morrison's Infratil, which make up around a 30% shareholding are likely to sit on the other side of the fence.
There are also regulatory issues in the way in regard to Overseas Investment Office and IRD approval of tax related matters germain to the deal and political pressure from the usual numbskull's like Winston "Baubles" Peters.
This bid however is more likely to succeed than the bid from Dubai Aerospace International, which was shot down by the AIA board even before it could be put to shareholders earlier in the year because there isn't the Middle East/Muslim factor involved and the DAE bid involved more control with a bigger stake.
Obvious problems with a Muslim company owning AIA made a big influence on my decision then to back shareholders holding onto their shares although I wasn't opposed to another foreign owner making a bid.
Having seen the CPPIB offer it looks good compared to the alternative if one was to stay a shareholder.
CPPIB has changed the terms of its planned amalgamation with AIA (assuming it gets to approx 40 per cent). Stapled securities issued under the proposed amalgamation will now include a convertible note with a face value of $2.75 (previously $3.35) an ordinary share with a face value of $.0.7055 (previously $0.1055) and $0.20 cash (unchanged). The convertible notes will pay a 7 % coupon rate.
So there is more debt servicing for the new AIA model under the Canadian proposal and this is clearly going to drag on profit in the short to medium term until the various benefits they have mentioned under the new structure are bedded down and then realised.
The Canuck investment board sure are canny investors with a good track record,
But it remains to be seen, if they are successful whether they can make their investment in AIA fly or if it is going to crash land.
There is going to be a AIA Board announcement and appraisal tomorrow(NZ Time) by Grant Samuel's, with valuation assessment and projections on passenger and aircraft demand.
The announcement yesterday of a possible listing on the NZX by New Zealand's biggest company, Fonterra, is the best news the New Zealand economy has had in generations.
Fonterra, a global milk products producer, manufacturer and exporter is a huge contributor to NZ Inc and the company has become a dominant force in the Global Dairy products boom.
It has now got to the point though, that it needs some serious capital to allow it to grow larger and compete with the likes of Nestle, Danone and Kraft. Fonterra's cooperative structure doesn't allow the company to raise the capital needed to foot it with the other big boys as the dairy industry players grow in size, through acquisitions and mergers.
There has been much bleating by Unions and the NZ First Political Party that the proposal isn't a good idea but frankly as Unionists and pollies what the hell would they know about business.
This is great news for Fonterra and its long term future and excellent news for New Zealand investors as they will be able to participate in an industry that dominates our export revenues and economy and contribute to the investment of a great business.
TheNZXis going to be more indicative of our economy by having Fonterra listed, possibly sometime in 2010, and the index will get the much needed boost that it has lacked all these years simply because of the impact the company has in our economy.
A cash cow indeed.
Sky City twiddling thumbs in the back row
Sky Tower, Auckland, NZ
News this week that Sky City Entertainment(SKC) is not likely to be able to tell the market anything about the 3 companies currently looking over SKC's books and what their intentions will be until "after Christmas" leaves this writer wondering how far management can stall shareholders any longer.
The timetable initially stood at an announcement at the end of October, then mid November and now after xmas. It makes me wonder how serious prospective bidders might be and doesn't inspire confidence in a good price for the company or a sale at all.
In other company news, contenders for SkyCity Cinemas - which could be worth as much as $116 million - are understood to include Australian firm Greater Union, US-based Reading Cinemas and Hoyts, previously a partnership between PBL and West Australian Newspapers, which was purchased by Australia's Pacific Equity Partners.
The vagaries of management speak are truly alive and well at Sky City, this from the company November 14:
SkyCity said yesterday it did not expect to progress with the cinema sale before the end of November.
What the hell does that mean, will they give a bloody deadline?
Sky City Management surely must be nominees for the worst board for 2007.
Morrison speaketh with forked tongue
I'm having trouble taking Lloyd Morrison seriously.
Morrison, the chief executive of Infratil, a director of Wellington Airport and a backer of a second airport for Auckland at Whenuapai has $300 million invested in Auckland Airport(AIA) on behalf of Infratil and the NZ Super Fund.
The trouble with this though is that Morrison's directorship of Wellington Airport and backing of a second port in Auckland put him in direct conflict with his large ownership of AIA shares and his ambition to get a seat on the AIA board.
Morrison says there is no conflict but it doesn't take a genius to figure out that he is staining credibility paper thin if he thinks that.
He was caught out today on National Radio Business today and last week when he said that the Canadian Pension bid was too low at $NZ3.65 and mentioned a price north of 4 bucks per share as being fair value for the company.
Interesting take when you consider than Infratil was involved in a bid, earlier this year, that was rejected by the board as too low, probably below the Canadian bid.
Morrison is a savvy investor and he is using subterfuge, doublespeak and attacking competitors in his bid to get some sort of control in the Auckland Airport deal/s.
While the AIA board hasn't been straightforward with shareholders over the last 8 months of this protracted bid for control of the port, Morrison's intentions are not clear and he cannot be trusted and shouldn't be elected to the AIA board on November 20.
In takeover news, Canadian Pension Plan Investment Board (CPPIB) has made a formal bid for AIA today.
The key terms of the offer are as follows:
Offer Price: The consideration offered for each Outstanding AIAL Shares taken up under the offer is $3.6555 in cash.
Partial Offer: The Offer is for 39.53% of the AIAL Shares not already held or controlled by the Offeror
Closing time: The Offer closes at 5.00pm on 13 March 2008 Partial Offer: The Offer is for 39.53% of the AIAL Shares not already held or controlled by the Offeror
Closing time: The Offer closes at 5.00pm on 13 March 2008
Hollow words, hollow competition
The owner of Share Trader and many other financial based sites in New Zealand threatened to "take legal action" over this revelation published in the Share Investor Blog a month ago and insisted it be removed and an apology made but as yet has failed to serve me with a writ.
This individual also made a threat of "legal action" over my use of "Good Returns Bookstore" banners on my site back in July even though I was legitimately using them as a genuineaffiliate.
Now I don't take kindly to threats and I am justly annoyed by this pest, but I guess threats ring pretty hollow when you use them as your modusoperandi when doing business and don't follow through.
Good Returns Bookstore, owned by Tarawera Publishing, continues to spam me with emails to buy their books, even though I canceled my affiliate membership and Tarawera'sSharetrader continues to host my contributions on their site, even though I didn't sign up to their new draconian membership terms and conditions(see the fee for spamming!!) as part of Tarawera taking over the site.
*Incidently you can buy all types of finance books from my Share Investor Bookstore, the range is many hundreds of times larger and at least 30% cheaper than Good Returns Books.
Sort yourself out Phil!
Learning to love China
World markets have been nervous again over the last few weeks. The Dow has slipped from over the 13600 mark to just above 130000, oil has reached almost 100 bucks, gold is over US$800 and the US dollar is doing an impression of a tiger moth with one wing.
Shakiness over future sub prime losses for banks and financial institutions have been blamed and to be sure there is more to come once sweetheart mortgage deals end but like any market jitters the market tends to overreact.
I think what could be happening now and we wont really know it for sure until we look back, is that we are partially seeing the start of the transition of dominance from the US as the financial and economic powerhouse to China. To be fair it ain't there yet but early signs seem to be showing the genesis of something akin to an economic transition.
The low value of the Yuan and the Chinese economy powering ahead means their economy will only power ahead in the future, while the US, a massive importer of foreign made goods is struggling as their dollar sinks and imports cost more.
Also the US as a safe haven for foreign investment is being eroded as their interest rates plummet and the cost of repaying debt to China gets ever more expensive.
The transition of America from a manufacturer to their home market and huge importer to a bigger exporter must come and will be easier to do as their dollar drops against their main trading partners.
It is then China will be seen as an opportunity to US manufacturers instead of a threat and the whole cycle of economic change will start again.
Let us remember that China was an economic powerhouse once before.
NZX Market Wrap
The NZSX-50 index, closed up 1.1 points at 4114.2, on turnover valued at $138.5 million.
Auckland Airport fell 3c to 301, after Canada Pension Plan Investment Board (CPP) submitted its formal cash bid for 39.53 per cent at $3.6555 per share. The airport company has also asked its advisers to seek other offers.
AIA shares had earlier risen to 308 before profit takers moved in. Turnover was a heavy $46.8m.
Fisher & Paykel Appliances rose 4c to 364, having gained about 30c since its first half result last week. The company is also considering selling its finance company to focus on its whiteware manufacture and retailing businesses.
Market heavyweight Telecom gained 4c to 425, Fletcher Building was up 8c at 1166 after being caned for most of the last week or so, and Contact Energy lost 5c to 885.
F&P Healthcare was up 3c at 328, Sky City gained 5c to 537 after getting knocked about yesterday after a broker downgrade. Sky TV lost 8c to 562, and Vector recovered some of yesterday's 6c loss to close up 3c at 233.
Air NZ, which has had a rough ride recently due to rising fuel prices, rose 1c to 202.
Among other stocks to gain, NZX was up 5c at 961, Freightways rose 2c to 380, Infratilwas up 2c at 293, Nuplex gained 5c to 725, and carpetmakerCavalier was up 3c at 315.
Hellaby Holdings lost 2c to 271, despite news it was trading ahead of last year, when it posted its first loss since re listing in 1994.
Rakon fell 5c to 515, Tower was down 4c at 204, HallensteinGlasson lost 3c to 445, Mainfreight was 5c lower at 710, and The Warehouse was down 2c at 522, marking time while waiting for a decision by the Commerce Commission as to whether Woolworths or Foodstuffs can make a bid to takeover the company.
News today that a bid by the Canada Pension Plan Investment Board for a sizable stake in Auckland International Airports [AIA.NZ] has been rejected by the Airport board is no surprise considering what was on offer.Chairman of the Board of Auckland Airport, John Maasland, said the proposal would have involved an amalgamation and the creation of a newly listed airport company. Under the deal Canada Pension would have owned between 39% and 49% of the new company.
"If the amalgamation proposal went ahead existing Auckland Airport shareholders would have retained between 51% and 61% of the new company and maintained an investment in the restructured company."
It is understood that there were offers of various structures giving value to shareholders of up to $3.90 per share.
The company would also have been loaded up with considerably more debt.
I didn't think this or any other deal would go through and I said so months ago but the reason for the deal falling through, while clear, I never considered.
While I am extremely pleased that the deal fell over, I think at least shareholders could have been asked for their input on the proposal.
The company has excellent long term prospects and shareholders who didn't bail out today will reap the long term rewards.
AIA shares were down NZ .21c today to $2.87 on heavy volume. Disc I own AIA shares in the Share Investor Portfolio
Update: Read January 2012 rumour about Airport takeover 
