Super funds disappointed at Sydney Airport rejection

A consortium, including AustralianSuper, QSuper, and IFM funds, has expressed disappointment over the Sydney Airport’s board rejection of its revised non-binding proposal aimed at acquiring all of its stapled securities for $8.45 cash per security. 

The original proposal submitted by on 2 July was priced at $8.25 per stapled security and was immediately rejected by Sydney Airport board. 

The Sydney Aviation Alliance, an Australian-led consortium which also included the IFM Australian Infrastructure Fund, the IFM Global Infrastructure Fund and Global Infrastructure Partners, said that at a time when Sydney Airport was facing short, medium and long term challenges, its original proposal offered full value to Sydney Airport securityholders. 

“Despite the further deterioration in outlook domestically and globally since that original proposal, after careful deliberation, and in an effort to finalise a path forward, the consortium increased its offer price to $8.45 per security,” the consortium said in a statement. 

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“The consortium firmly believes that the revised proposal offers full value to Sydney Airport securityholders and is extremely disappointed that the board has once more failed to engage with the Consortium and rejected the revised proposal.” 

The revised proposal was submitted to Sydney Airport on 13 August and valued Sydney Airport’s equity at $22.8 billion which was $7.3 billion above Sydney Airport’s equity value prior to the original proposal.  

The consortium said it believed any assessment of Sydney Airport security prices before the pandemic was of limited relevance given Sydney Airport’s materially changed circumstances and the weakened short and longer term aviation outlook, including potentially significant reductions to demand arising from the pandemic, the introduction of a competitor airport in western Sydney in 2026, and expected long-term changes in business and consumer travel preferences.  

Further to that, the revised proposal represented an offer value equivalent of $9.21 per stapled security when the offer enterprise value was adjusted for the impact of the 439 million securities issued and $1,980 million net cash proceeds raised in the August 2020 equity raising. This was above the highest price at which Sydney Airport’s securities have ever closed, it said. 

“Since the original proposal, AustralianSuper has joined the consortium. This further reinforces the substantial ongoing Australian ownership of this nationally significant infrastructure asset, with the consortium investing, directly or indirectly, on behalf of more than six million superannuation fund members,” the consortium added. 

“Given Sydney Airport’s lack of engagement and immediate rejection of the revised proposal (and the view that it is opportunistic), it appears unlikely that the parties can agree a path forward and, as such, there is no assurance the revised proposal will proceed.”