Dubai's Auckland airport bid teeters on the brink

Dubai's bid to acquire a majority stake in New Zealand's busiest airport has suffered yet another blow after Auckland International Airport's single biggest shareholder said it will not sell its shares.

Auckland City Council mayor said today the authority has decided to retain its 12.75% stake, but would not opposed to a foreign investor taking a minority stake.

"The council gave a very clear indication it won't touch the 12.75% stake, but it will give itself the opportunity for purchasing more shares or restructuring if it's deemed appropriate," Dick Hubbard told Reuters.

The major said the council might support a minority offer, if it would change the capital structure and dividend policy of the airport.

The council’s decision could be the final nail in the coffin for Dubai’s attempt to acquire up to 60% of Auckland airport.

The bid has been beset by local opposition from the start, to the point that state-owned Dubai Aerospace Enterprise (DAE) is now considering terminating the agreement.

DAE claimed on Friday the company that controls the airport had not done enough to ensure its NZ$2.6 billion ($1.8 billion) deal succeeds and was starting proceedings which could see the deal terminated this week.

Under the offer, which has been backed by the airport’s board, a new company will be created, in which DAE will have a stake of 51 to 60%.

DAE is currently in a five-day consultation period with the airport’s board the future of its bid, and will decide after Thursday whether to abandon its attempts or not.

The company told ArabianBusiness.com today it would not comment on Auckland council's decision while the consultation was ongoing.

Even if the aviation holding company does continue with its bid, it is looking less and less likely DAE will gain the 75% shareholder approval needed to proceed.

Manukau City Council also holds a 10.05% stake in Auckland airport and while it has not reached a decision yet, it is also expected to retain its stake.

In addition, local organisations that recently acquired a 6.2% stake in the airport have said there is a strong business case for New Zealand investments in the airport.

Combined with the 22.8% held by the councils, the 6.2% controlled by the state-owned New Superannuation Fund and utilities investor Infratil is enough to block DAE’s bid if it gets as far as a shareholder vote.

On Monday Canada’s state-backed pension fund entered the fray, saying it will seek a stake of up to 49% in Auckland airport.

The offer from Canada Pension Plan Investment Board (CPPIB) may be more likely to succeed as CPPIB has said it is comfortable with a minority stake and it would structure its bid to allow the councils to maintain their current levels of ownership.

Analysts have said Dubai’s current proposal is likely to fail, but it might succeed with a new cash-only offer at about NZ$3.60 a share.

CPPIB - which had previously approached Auckland airport shareholders in June about a potential offer - is expected to offer only a small premium to the current market price for its stake, which might cost it around NZ$1.3 billion at current prices.

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