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

Helen Clarks slipping teflon makeup leaves her naked

c Moreu 2008, from Stuff The crystal ball


Watch Video: Helen Clark on poll result (Newstalk ZB)


Helen Clarks spectacular outburst today, blaming the media for her and her party's bad showing in the latest political polls out last week, on a rampant media with the sole purpose of having her removed from parliament seems more than a little laughable considering the huge left-wing bias in the majority of the mainstream stuff written.

Clark has had them in her clutches, and mostly on her side for the last 9 years and her conspiracy theory that the media are out there to get her have shades of Robert Muldoon(yes I'm that old) as he crumbled drunk from office, and the worlds greatest conspiracy theorist when it comes to the media, Winston"Baubles" Peters.

I guess it is true what they say huh, you lie down with lapdogs...

The thin veneer of humanity left in Clark has slipped, like last weeks chardonnay and fish and chips, into the compost bin.

You can almost see her true personality soaking through the gritted stained teeth, and the unhinging looks more lovely everyday.

She has attacked the media in the past, when they don't say what she thinks is acceptable and a usually politically savvy Clark(probably the best political animal NZ has ever seen) has attacked a media, rightly or wrongly, in election year as being too stupid to make up their own minds about the PMs popularity.

Does she now expect them to go easier on her after that?!

Audrey Young and Fran O'Sullivan are no doubt sharpening their pens for another bite at the bitch again tomorrow, pass the dynamite.

Still there is always the ever present Electoral Finance Act for her to fall back on. Its eyes over ones shoulder are ever present.

I'm picking a landslide win to National come election 2008.


Related links

Labour has 'work to do' - Clark



c Political Animal 2008

Sky City 2008 half year exceptional on cost cutting

The initial reaction by Mr Market this morning to the Sky City Entertainment [SKC.NZX] announcement was to market down the share price to new lows. At current time of writing this, 5.00pm (NZ time) the share price was up 9c to 4 bucks NZ, although it had been up to $4.10 earlier today.


Key figures at a glance

- Revenue up 1.0% to $424.2m (+$4.2m)
- EBITDA up 9.1% to $161.4m (+$13.4m)
- EBIT up 13.1% to $125.6m (+$14.5m)
- Net Profit (before Cinemas write-down) up 36.2% to $61.3m (+$16.3m)
- Net Profit after Cinemas write-down $1.3m.
- Focus on managing operating margins
- Strong results in Darwin and international VIP play
- Auckland steady through refurbishment
- Improving Adelaide performance
- Weak Cinemas result.
-Adelaide Casino no longer for sale
-Profit guidance for full year, $108m to $110m (excluding Cinemas write-down)
-New CEO Nigel Morrison starts on March 3

Full NZX SKC profit announcement

Related Media reports

SKY City Profit Plunges
Cinemas drag Sky City down
Sky City first half plunges - Bloomberg


I think shareholders who hadn't been aware of the abnormal write-off figure of NZ$60 million for the SKC cinema division and saw the 1.2m profit, down 97% from last year got spooked. It pays to do research. Media also wrote headlines like SKY City Profit Plunges. Punters don't seem to want to read further than the headline.

Although profit was impacted in the same comparable period in 2007, so comes off a low base, the NPAT at 37% higher is clearly an excellent outcome. Off a very small revenue increase that result looks even better.

The most encouraging result is a small increase in revenue at the Auckland Casino, the company's main driver of profit. Considering the gaming floor has been interrupted by renovations this is a good sign things are being managed better. Clearly costs have been cut and hopefully that means there will not be any long term impacts from that cost cutting.

The VIP gaming sector looks to have fallen the casinos way this year, last year players cleaned the casino out.

Hamilton has a small increase in revenue and a larger increase in EBIT, so costs have been lowered at this outlet as well.

One of the stars of the show, is my favourite casino in the whole bunch, Darwin.

A Casino unencumbered with too much regulation, that still allows smoking, is situated in a boomtown, and is close to the Asian market. A great recipe for future success.

Revenue has increased strongly over the half by over 10%, but EBIT has soared by almost 30%, indicating a good handle on running costs.

The future looks rosiest at this outlet and wouldn't be surprised if it became the star of the show in the distant future, overtaking the Auckland Casino for group contribution.

Adelaide Casino, looks awful. Revenue and all other profit indicators have slipped. An added factor is that smoking has been totally banned from the premises. As longer term SKC shareholders know, that has a huge impact on profit for New Zealand operations when introduced in 2005.

Quite frankly, I'm not sure if management can turn this casino around, its a drag on company profits and only seems to be there to accumulate tax losses in my mind.

The tiny Queenstown casino achieved a stellar turnaround but is largely immaterial to the group result.

Sky City Cinemas have been written off, so the less said about that white elephant the better. It needs to be sold to some other poor sap. It hasn't done well and contrary to popular belief Hoyts, Sky City Cinemas competition, isn't having the same problem indicated by SKC management that revenue was down because of "bad weather and poor product". Its bad management pure and simple.

Overall the last half year was very pleasing to this shareholder, although parts of the group clearly need working on.

My main worry is that alot of the profit increase has been brought about by cost cutting and I'm not sure whether that is a short sighted thing. Hopefully it is prudent cost cutting. It also will be worth noting whether the costs cuts are one-offs or to be attributed annually.

It is something Elmar Toime, the acting CEO, successfully did at NZ Post and it appears his appointment had the desired effect at Sky City.

It will be up to the New CEO, Nigel Morrison, to drive the revenue and therefore the profit of the company going forward.

Management are "positive" for the coming half year.


Disc: I own SKC shares in the Share Investor Portfolio


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c Share Investor 2008