Sydney Airport rejects improved $16.8 billion buyout bid, open to higher offer

CORPORATE ACTION - SYDNEY. Sydney Airport Holdings Pty Ltd on Monday rejected an improved bid from a group of infrastructure investors worth A$22.80 billion ($16.81 billion) as undervaluing the airport operator, but said it was open to a higher offer.

The new offer valued Sydney Airport at A$8.45 per share, 2.4% higher than the previous offer of A$8.25 a share, and a more than 9% premium to the stock's Friday close.

A successful takeover would be among the largest buyouts ever of an Australian firm and underline a year of stellar deal activity, that has already seen a mega $29 billion buyout of Afterpay by Square.

The unanimous board rejection comes a month after the airport operator turned down an initial bid from the Sydney Aviation Alliance, a consortium of Australian investors IFM Investors and QSuper and U.S.-based Global Infrastructure Partners.

Record-low interest rates have prompted pension funds and their investment managers to chase higher yields.

Australia's largest pension fund, AustralianSuper, has joined the consortium, Sydney Airport said, in a move that could make it tougher for a rival offer to emerge given the requirement for 51% Australian control of the airport.

UniSuper, Sydney Airport's biggest shareholder with a 15.3% stake, has indicated it is open to rolling that equity into an investment in the privatised company, as required as part of the bid conditions.

Sydney Airport said its board was open to engaging with the Sydney Aviation Alliance if the consortium lifts its indicative price "to appropriately recognise long term value for Sydney Airport securityholders."

Sydney Airport is Australia's only listed airport operator and a purchase would be a long-term bet on the travel sector which has been battered by the pandemic.

Australia's international border remains closed and Sydney is in its eighth week of lockdown after an outbreak of the Delta variant of COVID-19.

Nevertheless, analysts and investors believe there is scope for a higher price given the strong long-term outlook for the airport operator.

Jefferies analyst Anthony Moulder said on July 15 that a price closer to A$9 a share would be a more appropriate premium for the airport operator.

Sydney Airport is due to report its first-half financial results on Friday. Sydney Aviation Alliance and AustralianSuper did not respond immediately to requests for comment.