Industry superannuation funds owned-IFM Investors has been rejected in its bid for Sydney Airport as the board feels it is “not in the best interests” of shareholders and a way for IFM to capitalise on the low share price as a result of the COVID-19 pandemic.
The firm, which is the investment manager for 26 superannuation funds, made the bid earlier this month for Australia’s largest international airport at $8.25 per share.
It already owned Adelaide, Brisbane, Melbourne, NT and Perth Airport.
In an announcement to the Australian Securities Exchange, however, Sydney Airport Group said the bid was “not in the best interest” of its shareholders.
While it acknowledged shares were likely to trade below the indicative price in the short term, it expected it to recover as the pandemic recovery commenced.
“The opportunistic timing of the indicative proposal given the significant impact of the COVID-19 pandemic on Sydney Airport’s performance. The indicative price is below where Sydney Airport’s security price traded before the pandemic,” Sydney Airport Group said.
“Sydney Airport is strongly positioned to deliver growth as vaccination rates increase and we move into the post-pandemic recovery period. 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.”
In response, IFM said it was "surprised and disappointed" the bid had been rejected as it felt it was an "extremely attractive" offer.
"The Consortium’s proposal represented a very significant premium to recent market prices including a 43% premium to Sydney Airport's immediate pre-proposal closing price on 1 July 2021 of $5.75 and an 81% premium to the issue price of Sydney Airport's $2 billion equity raising in August 2020 of $4.56.
"The Consortium believes any assessment of Sydney Airport security prices before the pandemic is of limited relevance given the company’s materially changed circumstances and challenging outlook. This includes potentially significant reductions to demand arising from the pandemic, the introduction of a competitor airport in western Sydney in 2026 and changes in business and consumer travel preferences."
Jamie Hannah, deputy head of investments and capital markets at VanEck, said: “Sydney Airports not surprisingly this morning announced that a takeover bid from a consortium of investors at $8.25 per share is too low, based on long-term forecasts and it not being in the best interest of shareholders.
“However, it didn’t rule out further discussion on a takeover. VanEck's own opinion was that this was too low as it didn’t value Sydney Airports at a reasonable premium and was opportunistic with airport traffic down. We do see more potential takeover bids”.