25 February 2008
The directors of Auckland Airport today unanimously recommended that shareholders should sell their shares into the takeover offer from the Canada Pension Plan Investment Board (CPPIB) for $3.6555 per share (less the 5.75 cents per share interim dividend to be paid next month).
However directors are not unanimous on whether shareholders should vote in favour or against CPPIB acquiring up to 40 per cent of the company.
A majority of the Airport board, comprising Tony Frankham, Keith Turner, Lloyd Morrison, and John Brabazon, are maintaining their recommendation for shareholders to vote against CPPIB acquiring 40 per cent of Auckland Airport as they believe the shares in the company are likely to be worth more longer term without CPPIB involvement.
Two directors, Richard Didsbury and Joan Withers, believe that shareholders should vote in favour of the offer as the price offered by CPPIB is unlikely to be available to shareholders in the foreseeable future.
For the transaction to proceed, the Takeovers Code requires a majority of shareholders who vote to approve CPPIB acquiring a 40 per cent stake. If this approval is not gained, the bid cannot proceed, regardless of the number of shares offered for sale.
Chairman of the board, Tony Frankham, said all the directors had carefully considered whether to revise their advice to shareholders on both elements of the transaction in light of the change in financial markets.
"All directors acknowledge that the market conditions have changed significantly since this bid was announced and this key factor has given rise to the need for directors to update their earlier recommendations.
"We all agree that shareholders would be unwise not to realise part of their holding at the favourable partial offer price if the partial offer receives approval to proceed.
"Each director has also carefully considered a wide range of other relevant factors in reaching their own decision in relation to the "voting" element of this bid.
"Directors who continue to recommend that shareholders should object to the takeover are of the view that the long term value of Auckland Airport has not fundamentally changed.
"They regard Auckland Airport as a strategic asset with long term horizons and consider ownership should not be determined by shorter term market fluctuations.
"They believe that over the longer term the value of Auckland Airport shares is likely to be greater without CPPIB having a 40 per cent stake which gives it effective control."
Mr Frankham said those board members have consistently said that the partial offer does not fully reflect the longer term value of Auckland Airport and despite further presentation from CPPIB do not accept that their introduction as a significant minority shareholder will assist the company in any material manner.
"As a result they maintain their view that, when considered on a longer term basis, on balance the CPPIB partial offer is not in the best interests of shareholders."
He said that Richard Didsbury and Joan Withers believe that the price offered by CPPIB to shareholders for some of their shares is unlikely to be available for the foreseeable future.
"They believe that the partial offer of $3.6555 per share (less the 5.75 cents per share interim dividend to be paid next month) is even more attractive today, at a time when shareholders are faced with uncertain global conditions that may continue for some years to come.
"The impact of those conditions does in their view put downward pressure on the valuation of the company and given global economic conditions, a more favourable offer in all aspects is unlikely to be available to shareholders in the near term.
"Therefore on balance, they feel that the certainty of selling 40 per cent of the company for significantly more than its current trading price outweighs the disadvantages of bringing on board a significant minority shareholder without material aeronautical or tourism connections.
"These directors therefore recommend that shareholders vote to approve the offer and sell their shares".
As already advised, the directors consider it is not possible to identify an appropriate party and present an alternative proposal to shareholders before the expiry of the CPPIB bid period on 13 March.
Mr Frankham said that if the CPPIB bid fails, the board will continue to seek a suitable cornerstone shareholder to take a smaller stake in the company however that process may take some time given the current state of financial markets.
"We envisage that it will continue to be challenging to meet all of the variously stated objectives of shareholders in relation to percentage holding, capital restructuring and non dilution of the Council interests," he said.