Sydney Airport gets a $ 16.7 billion purchase offer; the rise in stock is the price offered by Reuters

By Jamie Freed and Scott Murdoch

SYDNEY (Reuters) -Sydney Airport Holdings Pty Ltd said on Monday that a group of infrastructure investors had proposed a $ 22.266 billion ($ 16.7 billion) purchase from Australia’s largest airport operator, despite its shares being lower than the bid price.

If successful, it would be Australia’s largest deal this year, surpassing Endeavor Group Ltd and Star Entertainment Group Ltd’s $ 7.3 billion bid for Crown Resorts Ltd.

The Sydney Aviation Alliance – a consortium of IFM Investors, QSuper and Global Infrastructure Partners – has offered $ 8.25 per share at Sydney Airport, a 42% premium until the stock closes on Friday.

The news raised the stock to 38% to $ 8.04 in early trading on Monday, though it then fell back to around $ 7.55 to see if the deal would be successful.

Sydney Airport has stated that the offer was below the stock price before the pandemic and said it would review the proposal, give proper responsibilities and recommend it to shareholders if there is no higher bid.

The airport operator’s share price hit a record $ 8.86 in January last year before the coronavirus pandemic novel caused the travel demand to collapse.

The company is the only listed airport operator in Australia. A successful agreement would coincide with other major airports in the country owned by infrastructure investment consortia, especially pension funds.

The Australian mandatory retirement savings system, known as a pension, has $ 3.1 trillion in assets, according to the Australian Pension Fund Association.

With low record interest rates, the funds are looking at infrastructure investments to achieve higher returns.

“The right condition is to look at those assets that have reached 75 years of life when the conditions are at their lowest,” said a Sydney airport investor, who declined to be named because the company’s proposal was still being evaluated. “It’s opportunistic in that sense, but understandable.”

Australia’s international borders are expected to remain closed until at least the end of the year, partly due to a slower vaccination program than in most developed countries.

The trip home was also interrupted by a two-week lockdown in Sydney during a normally busy school holiday after a highly contagious Delta variant of COVID-19 occurred. Other states have closed borders to Sydney residents.

In May, international traffic at Sydney Airport fell by more than 93% compared to the same month in 2019, while domestic traffic fell by 39.2%.

The airport has long had a monopoly on round-trip traffic in Australia’s most populous city, but that will end in 2026 with the opening of Sydney Airport in the west.

The Sydney Aviation Alliance said it did not anticipate making significant changes to airport management, services, operations or target credits.

The consortium says its members invest directly or indirectly on behalf of more than 6 million Australians and collectively manage more than $ 177 billion in infrastructure worldwide, including stakes in 20 airports.

IFM is involved in major airports in Melbourne, Brisbane, Perth and Adelaide. QSuper has a stake in Heathrow Airport in the UK, and Global Infrastructure is investing in Gatwick and London City airports in that country.

Their offer is UniSuper, the largest shareholder in Sydney Airport with a 15% stake, and has agreed to repurchase a stake in the consortium’s vehicle for an equivalent equity.

UniSuper, which also has stakes in Adelaide and Brisbane airports, said it was not a member of the consortium and did not know any details outside of the publicly disclosed information.

“UniSuper, however, sees in principle the merit of becoming a non-listed company from a public company listed at Sydney Airport. UniSuper also has the opinion of the consortium partners,” the fund said.

($ 1 = $ 1,3294)