Auckland Airport in $126m offer

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OFFER: AIA plans to raise as much as $126.4 million through a pro rata share offer to fund its Australian investments.

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Auckland International Airport plans to raise as much as $126.4 million through a pro rata share offer to fund its investment in North Queensland airports that's copped flack from investors wanting proof it will boost earnings. 

Institutional and retail shareholders will be able to subscribe to one share for every 16 at a price of $1.65 a share to a maximum of some 76.6 million new shares issued. That's a 14% discount to the stock's $1.92 price at the close of trading yesterday. The cash raised will be used to pay down debt used to finance its purchase of a 24.6% stake in Queensland's Cairns and Mackay airports for $166 million.  

Both Auckland City Council and Manukau City Council, which combined hold about 23 per cent of Auckland International Airport, have confirmed they intend to take up the share offer.

"It's a very small acquisition, but there are a whole lot of unanswered questions" about the strategy of the company and what the future capital requirements of further expansion will be, said Rickey Ward, equities manager at Tyndall Investment Management. "It needs to signal its future growth aspirations, and if it wants to be an investment company, it will be rated accordingly."  

Auckland Airport, New Zealand's busiest gateway, bought into the North Queensland airports earlier this month as it seeks to secure more tourists from Asia and ramp up New Zealand travel to Australia's popular tropical region. Goldman Sachs JBWere downgraded its earnings estimate for the company by 5% and called the initiative an "expensive experiment."  

The shares have slid 6.9% this year, and shed 10 cents since Jan. 11, when the company announced the deal. The stock is halted today for the capital raising. 

Ward expects institutions to take up the offer to prevent their holdings from being diluted, though people will remain sceptical until they get more details of the airport's strategy. 

The offer closes for institutional investors at 2 p.m. tomorrow for a bookbuild to be completed the following day. Retail investors have until Feb. 18 for a bookbuild on Feb. 22.

Credit Suisse and First NZ Capital will act as the joint leaders for the offer.  

Businesswire