Sydney Airport rejects opportunistic 22b takeover bid

The board of Sydney Airport has turned down a $22 billion bid for the company from a consortium of superannuation giants, saying the offer undervalues the critical asset and is opportunistic.

Following a meeting of the David Gonski-chaired board on Wednesday, the company said directors had unanimously decided the bid was too low and that it was not in the interests of shareholders to accept the cash for their shares.

The board members ”have unanimously concluded that the indicative proposal undervalues Sydney Airport and is not in the best interests of securityholders,” the company said in a statement to the ASX on Thursday morning.

The Sydney Airport board has rejected a $22 billion takeover, saying the timing is opportunistic as it battles the effects of the pandemic.Credit:James Brickwood

The $8.25-a-share offer was a 42 per cent premium to the stock’s pre-bid trading price, but the board argued the timing of the bid was aimed at exploiting the crisis in aviation created by international border closures due to COVID-19.

The board said Sydney Airport shares were likely to trade below the offer price in the “short term”, but it would only consider selling the company on terms that recognised the long-term value of the asset.

In deciding to the reject the bid, the board said it had considered a range of scenarios for the post-pandemic recovery and other factors including the unique nature of the asset, the potential to further develop the airport, and its chances to grow strongly as more people were vaccinated.

Another factor considered was “the opportunistic timing” of the bid as the airport has been slammed by COVID-19, which caused it to suspend dividends and raise $2 billion in new equity last year.

It said the company had delivered total shareholder returns of 19 per cent a year between the 2015 and 2019 financial years, and it would be well positioned to resume growth in the future.

“Sydney Airport is strongly positioned to deliver growth as vaccination rates increase and we move into the post pandemic recovery period,” the statement said.

“It has rapidly adapted to the COVID environment, strengthening its balance sheet and tightly managing costs to maintain flexibility to respond to a range of recovery scenarios and pursue sensible growth opportunities as the recovery unfolds.”

The company said its directors “recognise that the security price is likely to trade below the consortium proposal’s indicative price in the short term, however Sydney Airport will only progress a change in control transaction on terms that deliver and recognise appropriate long term value for Sydney Airport securityholders.”

More to come

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon

Clancy Yeates is a business reporter.

Share this post