$16.7 Bln Acquisition Offer For Sydney Airport As Funds Seek Infrastructure Investments

A A$22.26 billion ($16.7 billion) purchase of Sydney Airport Holdings Pty Ltd has been proposed by a group of infrastructure investors which will be largest ever buyouts of Australia. According to analysts, this proposal was based on longer-term view of the travel sector that has been severely affected by the Covid-19 pandemic.

Currently the interest rates in Australia are at local lows which have prompted pension funds and their investment managers to look for investment options that have higher yields. The proposed acquisition puts the value of the company at A$30 billion including debt and a successful deal will allow the purchasers to make large financial gains when borders are reopen resulting in a rebound in the travel industry.

According to Refinitiv data, if the deal for the biggest airport of Australia goes through, it would be one of the largest-ever acquisition deal of Australia in terms of enterprise value in U.S. dollar terms, and be at par with the $22 billion acquisition of mall operator Westfield Group by Unibail-Rodamco in 2017.

And for 2021, it would also be the eighth biggest deal globally and the second largest airport acquisition ever – only exceeded by the $30.2 billion purchase of Britain’s Heathrow Airport in 2006.

A$8.25 per Sydney Airport share, a 42 per cent premium to the stock’s Friday close, was offered in the deal by the Sydney Aviation Alliance – which is a consortium made up of IFM Investors, QSuper and Global Infrastructure Partners.

The offer however was lower than the pre pandemic share price of the Sydney Airport. It noted and said that the proposal would be reviewed by it. The success of the deal is contingent on granting due diligence and recommending it to shareholders in the absence of a superior offer.

The stock price of the airport operator touched a record of A$8.86 in January last year just prior to the Covid-19 pandemic causing a collapse of the travel industry.

The company is Australia’s only listed airport operator. If the deal goes through it would set the ownership of the airport similar to the other major airports of the country – which are all owned and operated by consortia of infrastructure investors, primarily pension funds.

According to the Association of Superannuation Funds of Australia, assets of A$3.1 trillion exists with Australia’s mandatory retirement savings system, known as superannuation.

Higher yields, amidst record low rates of interest, are being sought by funds as they seek to make investments in infrastructure.

“It’s the right timing to be looking at these assets which have got a 75-year life when conditions are arguably at the bottom,” said a Sydney Airport investor who declined to be named because the person’s firm was still assessing the proposal. “It’s opportunistic in that regard, but understandable.”

A slower vaccination programme than in most developed countries is expected to be partly responsible for the current closure of Australia’s international borders and it is expected that this would continue until at least the end of the year.

(Adapted from Reuters.com)


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