Australia's largest acquisition offer on the ASX to date in 2021 is now on the runway after the country's busiest airport received a $22 billion takeover proposal at a 42 per cent premium from a consortium of Australian and international investors.
The offer for Sydney Airport (ASX: SYD) at $8.25 per share was made by a consortium including Melbourne-based IFM Investors, Brisbane-based superannuation fund QSuper which is expected to merge with Sunsuper in November, and New York-based Global Infrastructure Management, LLC.
The deal comes with a significant catch though. Another superannuation fund, Unisuper which owns 15 per cent of the airport, would have to agree to reinvest its equity interest in the consortium's holding vehicle.
SYD shares have been battered by the pandemic, falling sharply from highs close to $9 per share at the end of 2019 to below the $5 mark by late March 2020. The recovery since then has been turbulent depending on the winds of lockdowns, domestic border closures and speculation over the recommencement of normal international travel.
In the latest statistics for May, Sydney Airport's international passenger numbers were down 96.6 per cent compared to the same period in 2019, and down 57.6 per cent for domestic passenger traffic.
The Sydney Airport board is assessing the proposal and has asked shareholders to take no action at this stage as there is no certainty the proposal will result in a transaction. Barrenjoey and UBS have been appointed as financial advisers, along with Allens as the legal adviser.
SYD boards highlight Sydney airport is world-class and one of Australia's most important infrastructure assets as the gateway to international travel in and out of the country.
"The indicative proposal has been made during a global pandemic which has deeply affected the aviation industry and the Sydney Airport security price," the board said.
"The indicative price is below where Sydney Airport's security price traded before the pandemic.
"The boards are undertaking detailed analysis of, amongst other things, whether the proposal is reflective of the underlying value of the airport given its long-term remaining concession and the expected short-term impact of the pandemic."
An eventual deal would also be subject to due diligence, approval from investment committees and consortium members, a unanimous recommendation from Sydney Airport boards in favour of schemes of arrangement, and regulatory approval.
Sydney Airport effectively has a monopoly on international air travel to and from Australia's largest city, but a project is currently underway to start flights from a new Western Sydney (Nancy Bird-Walton) International Airport in 2026.
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