What happens next at Auckland International Airport?

November 22

The next important development at Auckland International Airport will be the mail out of Canada Pension Plan Investment Board’s (CPPIB) takeover offer for 39.5% of the company on Friday December 14. This will be followed by Grant Samuel’s independent advisor’s report and the director’s recommendation on the partial bid, which is expected before the end of December.

The offer is not likely to be successful for a number of reasons including:

• Auckland Airport’s share price is trading well below the offer price, indicating the market’s scepticism on the bid
• Two major shareholders, Manukau City Council and the Infratil/New Zealand Superannuation Fund partnership, have indicated that they will not be accepting
• Goldman Sachs JBWere analyst Marcus Curley believes that the bid, which would be the precursor to a major restructuring and recapitalisation, could eventually bankrupt the company.

But the voting at this week’s annual meeting gives the clearest signal that the CPPIB offer will not be successful.

The large number of votes cast in favour of the three new directors, and the large negative vote cast against existing director Joan Withers, indicates that shareholders are dissatisfied with the performance of the pre-annual meeting board and have given a strong mandate to the new board. Most of the new directors are expected to be opposed to the CPPIB offer.

Auckland International Airport AGM: Strong support for new directors

	For	Against	For	Voted
To re-elect Joan Withers	445,765,040	257,812,761	63.4%	57.6%
To elect Richard Didsbury	635,951,824	67,314,474	90.4%	57.5%
To elect John Brabazon	524,127,518	177,990,992	74.6%	57.4%
To elect Llyod Morrison	611,116,057	126,168,252	82.9%	60.3%

The main priority of the new board is to determine whether John Maasland should remain in the chair and whether it wants a cornerstone shareholder, a restructuring of the company and/or a capital return to shareholders. Once these decisions have been made they need to be clearly communicated to the investment community.

As the new directors have indicated that they want a new cornerstone shareholder and a capital return we would expect further specific developments on these issues in the first half of 2008, after the current CPPIB offer is unsuccessful.
         
Brian Gaynor, 22 November 2007