Sydney Airport Nixes $16.8B Buyout Bid

Sydney Airport Holdings Pty. Ltd. has rejected an improved A$22.80 billion ($16.81 billion) bid from a group of infrastructure investors, saying that it undervalued the airport operator, but that it was open to a higher offer.

Photo Insert: Sydney Airport air traffic control tower

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. Shares were steady in afternoon trading on Monday, with the increased price below market expectations of closer to A$9 a share, Jamie Freed and Paulina Duran reported for Reuters.

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.

But it would require Sydney Airport to allow due diligence as well as receiving approvals from shareholders, the competition regulator, and the Foreign Investment Review Board, a process that typically takes months.

The unanimous board rejection comes a month after the airport operator turned down an initial bid from the Sydney Aviation Alliance (SAA), a consortium of Australian investors IFM Investors and QSuper, and US-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 privatized 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 recognize long term value for Sydney Airport security holders."

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