Sydney Airport shareholders back $17bn takeover

April 2022 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

April 2022 Issue

The $17bn takeover of Sydney Airport by the Sydney Airport Alliance consortium led by IFM Investors is moving ever closer following the announcement that the airport’s shareholders voted overwhelming in the deal’s favour.

In an announcement to the Australian Securities Exchange (ASX) in February, Sydney Airport said the requisite number of securityholders had passed the three resolutions to approve the company scheme of arrangement and the trust scheme under which Sydney Airport Alliance will acquire all securities in Sydney Airport. All three resolutions received over 96 percent of votes in favour while 79.29 percent of the total number of securityholders voted in favour of the company scheme resolution. The takeover, which is being carried out via a scheme of arrangement, required approval from a majority of shareholders by number voting. At least 75 percent shares by value voted had to be in favour for the sale of the airport to proceed.

The directors of Sydney Airport also unanimously recommended voting in favour, including chairman David Gonski. “I would like to emphasise that the board, in making its recommendation, assessed the proposal against the fundamental long-term value of Sydney Airport, not just the shorter-term challenges facing the airport as a result of COVID-19,” said Mr Gonski. “The Sydney Airport board took the view that the cash consideration of $8.75 per security does fairly reflect the fundamental long-term value of the airport,” he added.

Those shareholders who objected to the deal were mainly retail investors, according to media reports following the meeting, who listed concerns including having to pay steep taxes when accepting cash from the deal. The objecting shareholders voiced strong objections to the company’s sale, arguing the sale price does not reflect the airport’s long-term value.

One of the company’s biggest institutional investors, the Australian Foundation Investment Company (AIFC), was not keen on the deal, with the company’s managing director, Mark Freeman, saying the AIFC was a very reluctant seller. The airport has been one of AFIC’s biggest investments, ranking 14 in its top 30 portfolio holdings at the end of 2021 ahead of the Goodman Group, Reece, Amcor and Rio Tinto.

On 8 November 2021, Sydney Airport agreed to the takeover offer from the Sydney Airport Alliance, which comprises fund managers IFM Investors and Global Infrastructure Partners, as well as Australian superannuation funds QSuper and AustralianSuper. UniSuper will continue to hold a 15.01 percent interest in the company, following completion of the deal.

Following the confirmation of the shareholder vote, Sydney Airport confirmed it had applied to the court for orders approving the company scheme of arrangement at a hearing in February. Following the court approval, Sydney Airport was removed from the ASX, around 20 years after it joined the exchange.

Approval of the deal comes at a crucial time for the aviation industry. Australia’s borders reopened to all vaccinated visitors on 21 February. A return of overseas travellers is particularly important for Sydney Airport’s future earnings as the airport earns much higher fees from international flyers than from domestic travellers. International travellers account for about two-thirds of the airport’s passenger revenues. Despite the planned opening of the new Western Sydney Airport in 2026, Sydney Airport is expected to remain the pre-eminent airport for international travellers due to its relative proximately to Sydney’s central business district and the city’s more affluent neighbourhoods.

Australia’s competition watchdog cleared the proposed takeover of Sydney Airport in December 2021, stating that the deal was “unlikely” to reduce competition “in a market that already has such little competition”.

Richard Summerfield