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Sydney Airport Receives $ 16.7 Billion Purchase Offer; increase in shares

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SYDNEY – Sydney Airport Holdings Pty Ltd said on Monday that a consortium of infrastructure investors had proposed the cash purchase of A $ 22.26 billion ($ 16.7 billion) from the operator of Australia’s largest airport, which sent its shares up 38%.

If successful, it would be the largest deal of its kind in Australia this year, overshadowing the $ 8.1 billion spin-off of Endeavor Group Ltd and Star Entertainment Group Ltd’s $ 7.3 billion offering for Crown Resorts Ltd.

A consortium made up of IFM Investors, QSuper pension fund and Global Infrastructure Partners, called Sydney Aviation Alliance, has offered A $ 8.25 per share of Sydney Airport, a premium of 42% over the closing price of the share on Friday.

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Its shares were trading at A $ 8.04 on Monday morning, but then fell back to about A $ 7.68.

Sydney Airport noted that the offer is below the pre-pandemic share price and said it was reviewing the proposal, which depends on allowing access to due diligence and recommending it to shareholders in the absence of a superior offer.

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

The company is the only publicly traded airport operator in Australia. A successful deal would align its ownership with the other major airports in the country that are owned by consortiums of infrastructure investors, mainly pension funds, with long-term investment horizons.

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Australia’s mandatory retirement savings scheme, known as retirement, has assets of AU $ 3.1 trillion, according to the Australian Retirement Fund Association.

With interest rates at record lows, the funds are looking to investments in infrastructure to obtain higher returns.

The offer comes at a time when Australia’s international borders are expected to remain closed until at least the end of the year due in part to a slower vaccination program against the novel coronavirus than in most developed countries.

Domestic travel has also been severely disrupted by a two-week lockdown in Sydney during the normally busy school holiday period, following an outbreak of the highly contagious Delta variant of COVID-19. Other states have closed borders to Sydney residents.

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In May, Sydney Airport’s international traffic was down more than 93% compared to the same month in 2019, while domestic traffic was down by 39.2%.

The airport has long had a monopoly on traffic to and from Australia’s most populous city, but that will end in 2026 with the opening of Western Sydney Airport.

Sydney Aviation Alliance said it did not anticipate making substantial changes to the airport’s target management, services, operations or credit ratings.

The consortium said its members invest directly or indirectly on behalf of more than 6 million Australians and collectively have more than A $ 177 billion in infrastructure funds managed globally, including stakes in 20 airports.

IFM has interests in the main Australian airports of Melbourne, Brisbane, Perth and Adelaide. QSuper owns a stake in London Heathrow Airport and Global Infrastructure is invested in London City and Gatwick airports.

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Its offer is contingent on UniSuper, the airport’s largest shareholder with a 15% stake, agreeing to reinvest its equity stake in an equivalent equity stake in the consortium vehicle.

“This will serve to maximize the share of Australian retirement funds in the current ownership of Sydney Airport,” said Sydney Aviation Alliance.

UniSuper, which also has stakes in Adelaide and Brisbane airports, did not respond to a request for comment.

Sydney Airport said it had hired Barrenjoey and UBS as financial advisers.

Shares of New Zealand’s Auckland International Airport Ltd, the only other publicly traded airport operator in Australasia, were trading nearly 6% higher on Monday morning.

($ 1 = AU $ 1.3294) (Information from Jamie Freed in Sydney and Scott Murdoch in Hong Kong; Additional information from Nikhil Kurian Nainan and Soumyajit Saha in Bengaluru; Editing Stephen Coates and Christopher Cushing)

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