Govt rejects Auckland airport bid
Shares in Auckland International Airport fell 11 per cent after the Government rejected the Canada Pension Plan Investment Board's $1.7b bid for 40 per cent of the firm.
Land Information Minister David Parker and Associate Finance Minister Clayton Cosgrove said today that under the Overseas Investment Act they were required to decline consent if they were not satisfied all of the applicable criteria were met.
"In this case we are not satisfied that the ‘benefit to New Zealand' criterion is met."
Auckland airport shares fell 25 cents, or 11 per cent, to $2.10 in early sharemarket trading.
Auckland airport shareholders had approved the $3.60 a share bid from CPPIB, which would hold voting rights for just 24.9 per cent of Auckland airport's shares.
CPPIB itself said it was disappointed at the outcome of its Overseas Investment Act application.
The application needed approval in order for the offer to go unconditional.
CPPIB's head of infrastructure, Graeme Bevans, said under the terms of the offer it would now lapse.
"Shareholders who accepted the offer are now free to deal with their holdings as they wish."
The ministers said they were not satisfied that refusing the application would adversely affect New Zealand's image overseas or its trade or international relations, nor result in New Zealand breaching any of its international obligations.
"We note the Overseas Investment Office advice that other countries also have foreign investment restrictions, including on airport ownership."
They said even if they were to agree with the Overseas Investment Office's conclusion that the benefit to New Zealand criterion was met, Cosgrove and Parker said they could not agree that the benefit was "substantial and identifiable."
The Overseas Investment Office said nine factors the ministers decided were of high importance were all either assessed negatively or were not able to be conclusively assessed.
These included the creation and retention of jobs, increased export receipts, additional investment for development purposes and New Zealand control of strategically important infrastructure.
Auckland airport chairman Tony Frankham said the board would focus on "moving the business forward" following the rejection of CPPIB's bid.
Shareholders who had accepted the offer would now be free to trade their shares, Frankham said.
He said the ministers' decision was not consistent with the wishes of the majority of shareholders who voted to approve the takeover.
"Directors will re-consider the issues of the company's capital structure and the prospects for introducing a new cornerstone shareholder that could add strategic value.
"These issues will be revisited in light of the very different circumstances we face today; including the new limits placed on investment in strategic assets by overseas investors, the changes in the tax treatment of stapled securities and the material deterioration in global financial markets."
He said the airport's directors believed significant investment in the airport and the prospect of new airline capacity would enable it to continue to deliver sustainable growth in earnings.
Oliver Saint from the New Zealand Shareholders' Association said the decision to reject the Canadian bid was expected.
He saw it as ideologically driven, and an indication of a Government that expected to be beaten at the next election.
"They're making rules up as they go along," he said.
Despite that he expected the wider implications of the decision to be limited.
In future, overseas investors would probably ask themselves whether a possible investment was likely to be considered by politicians as a core asset, Saint said.
If they decided it was, they might have second thoughts.
"It's time New Zealand came out and said what its core assets were," he said.
- with NZPA