The consortium of super funds eyeing the purchase of Sydney Airport has threatened to leave the negotiation table after the airport swiftly denied a revised bid on Monday.
The Sydney Aviation Alliance Group – a consortium of industry investors that includes IFM Investors, QSuper and Global Infrastructure Partners and, recently, AustralianSuper – last month proposed a $22 billion takeover bid to the airport’s operators, which the board quickly rejected and dubbed “opportunistic”.
On Friday, 13 August, the superfunds upped their bid to $22.8 billion, a $0.25-per-share increase to $8.45 per security, which was again swiftly rejected on Monday morning for similar reasons.
In response, the consortium has said it is willing to walk away entirely from negotiations.
“Given Sydney Airport’s lack of engagement and immediate rejection of the revised proposal … it appears unlikely that the parties can agree a path forward and, as such, there is no assurance the revised proposal will proceed,” the group said in a strongly-worded statement, released late Monday.
The consortium noted it was “surprised and disappointed” by the immediate rejection of its first bid last month, as well as the board’s “absence of engagement” in negotiations.
“At a time when Sydney Airport is facing short, medium and long-term challenges, the consortium believes the original proposal offered full value to Sydney Airport securityholders,” it said.
The group noted that it increased its bid despite deteriorating domestic aviation outlooks as the entire state of NSW enters lockdown, and Melbourne’s lockdown gets extended.
It again accused the airport of failing to engage in meaningful negotiations, and stated both its previous offers were already at a premium.
“Whilst noting the limited relevance of pre-pandemic price comparisons, the revised proposal represents an offer value equivalent of A$9.21 per stapled security when the offer enterprise value is adjusted for the impact of the 439m securities issued and A$1,980 million net cash proceeds raised in the August 2020 equity raising,” the group said.
“This is above the highest price at which Sydney Airport’s securities have ever closed.”
On Friday, Sydney Airport securities closed at $7.75 per share, giving it a market value just below $21 billion, however the airport’s pre-pandemic value soared above $9 per share.
Meanwhile, in a statement to the ASX rejecting the $22.8 billion bid on Monday morning, the airport stated its board had again “unanimously concluded” that the revised offer “continues to undervalue the company” and is “not in the best interests of securityholders”.
Similar to the previously rejected bid, the airport stated that the current COVID-19 operating environment “does not change the board’s view of the long-term value” of the airport.
Further, the board said that the airport is “strongly positioned” given Australia’s “rapid increase and acceleration” of its vaccination rollout is likely to see conditions improve and the re-opening of borders.
Despite the rejection, the airport noted that it was “open to engaging” with the consortium, should the group be prepared to increase its bid.