Sydney Airport suitors "extremely disappointed" with second rebuff

A consortium of suitors trying to acquire Sydney Airport (ASX: SYD) for almost $22.8 billion claims the circumstances of the asset they wish to buy have "materially changed" since pre-pandemic times, presenting the vision that in contrast to a more volatile aviation industry, their latest offer would provide "certainty of value".

Now describing themselves as the Sydney Aviation Alliance - a consortium including IFM Investors, QSuper, Global Infrastructure Management, LLC, and now AustralianSuper - the bidders have not taken kindly to the Sydney Airport boards' second rejection.

"At a time when Sydney Airport is facing short, medium and long term challenges, the consortium believes the original proposal offered full value to Sydney Airport securityholders," the consortium said in a release this afternoon.

"Despite the further deterioration in outlook domestically and globally since that original proposal, after careful deliberation, and in an effort to finalise a path forward, the consortium increased its offer price to A$8.45 per security.

"The consortium firmly believes that the revised proposal offers full value to Sydney Airport securityholders and is extremely disappointed that the board has once more failed to engage with the consortium and rejected the revised proposal."

The suitors explained their offer's 47 per cent premium to SYD shares prior to the takeover offer is higher than all other large Australian transactions announced this year.

The Sydney Airport board have reiterated the "strategic and irreplaceable" nature of the assets and underscored its strong long-term prospects, but the consortium begs to differ.

"The consortium believes any assessment of Sydney Airport security prices before the pandemic is of limited relevance given Sydney Airport's materially changed circumstances and the weakened short and longer term aviation outlook," the consortium says.

"This includes potentially significant reductions to demand arising from the pandemic, the introduction of a competitor airport in western Sydney in 2026 and expected long term changes in business and consumer travel preferences.

The consortium believes that in the absence of its offer the SYD share price would likely be trading materially below the A$5.75 closing price prior to the proposal.

"Since the Original Proposal, all of New South Wales has gone into lockdown, Greater Sydney's lockdown has been significantly extended, and other states and territories are facing lockdowns of uncertain duration," it said.

"Qantas, Jetstar, Virgin and REX have also announced they are standing down more than 4,000 airline workers and the global environment has deteriorated materially. Qantas' share price is down 6 per cent and the share prices of international airport peers are down on average 8 per cent over this period.

"Whilst noting the limited relevance of pre-pandemic price comparisons, the revised proposal represents an offer value equivalent of A$9.21 per stapled security when the offer enterprise value is adjusted for the impact of the 439 million securities issued and A$1,980 million net cash proceeds raised in the August 2020 equity raising."

The bidding group noted the addition of AustralianSuper would reinforce the substantial ongoing Australian ownership of this nationally significant infrastructure asset, with the consortium investing, directly or indirectly, on behalf of more than six million superannuation fund members.

"The consortium firmly believes that the Revised Proposal, if implemented, would deliver significant value and economic certainty to Sydney Airport securityholders and is in the long-term interest of Sydney and the travelling public," they said.

"Given Sydney Airport's lack of engagement and immediate rejection of the revised proposal (and the view that it is opportunistic), it appears unlikely that the parties can agree a path forward and, as such, there is no assurance the revised proposal will proceed.