Auckland Airport deal off………for now…………….

An NZPA and The Dominion Post report says that Auckland International Airport and its suitor Dubai Aerospace Enterprise have agreed to go their own ways – for now.

In a cryptic joint statement, DAE said that in light of recent developments its offer “could not proceed in the form proposed”.

Chief executive Kjeld Binger said he regretted that the opportunity to do business with Auckland International Airport did not eventuate “on this occasion”.

DAE said last Thursday that it was pulling out of its $2.6 billion proposal to buy between 51 per cent and 60 per cent of the airport.

It said Air New Zealand’s legal proceedings filed in late July disputing landing-fee increases meant that under the terms of the merger implementation agreement it could pull out of the deal.

DAE also said that Auckland airport had breached the agreement by not using its best endeavours to ensure a successful outcome of the proposal.

The airport disputed both claims, and after a five-day consultation period the parties have agreed to terminate the agreement with each party bearing its own costs.

Auckland airport was potentially liable to up to $4 million of DAE’s costs, if it was found to be in breach of the agreement.

A source told The Dominion Post on Tuesday that DAE’s move was strategic and designed to free it up to make a cash bid at $3.60 after it became apparent the proposal would not succeed.

Market attention is now on the Canadian Pension Plan Investment Board, which said this week it would make an offer proposing to buy up to 49 per cent of the airport which would also allow the two shareholding councils, Manukau City Council and Auckland City Council, to retain their holdings and be given board representation.

However, Wellington investment firm Infratil, which controls a 6.2 per cent holding in the airport, has said the Canadians would struggle to find enough support to give them nearly half the company.

Infratil is also understood to be working with several parties to form a consortium to buy 49 per cent of the airport.

With the support of the councils, either party would have effective control of the airport.  Infratil owns two thirds of Wellington airport, with the remaining third held by Wellington City Council.

Analysts believe DAE could come back with a cash bid for the airport, but will wait till CPP discloses details of its offer. Goldman Sachs JBWere analyst Marcus Curley said a cash bid was likely only if CPP came in below $3.20 a share.

Centre for Asia Pacific Aviation analyst Ian Thomas said DAE would turn its attentions and cash box toward China or India, where it was known to have looked at several airports and other aviation industry businesses.

Widespread public opposition to foreign ownership has been crucial to scuttling the proposal announced in July, with local body elections due next month. The lack of support from the councils, which own 23 per cent, and Infratil, meant that the DAE deal would not be able to gain the necessary 75 per cent shareholder approval in November.

Auckland Mayor Dick Hubbard said the only surprise was that it took so long for the proposal to be pulled.  He said the AIA board had totally underestimated public antipathy to foreign ownership.

The Green Party welcomed the bid’s demise and was opposed to a bid from the Canada Pension Fund.  Party aviation spokeswoman Sue Kedgley has introduced a member’s bill to limit foreign ownership of key strategic assets to 25 per cent.

“We need to make it clear to foreign bidders that they cannot hope to achieve a controlling interest in Auckland airport,” she said.

Report by The Mole