Auckland Council agrees to sell half airport stake

By NZPA

Friday 6th December 2002

Auckland City Council has agreed by 11 votes to eight to sell half of its 25.6 percent stake in Auckland International Airport.

The sale, through an institutional book-build at $4.90 per share, will raise $190.8 million.

Auckland Airport shares jumped 14c to 530 when trading resumed following a halt ahead of the council's announcement. They later descended to 528 in choppy trading.

"Predictably, it relieved the market of uncertainty so the share price bounded ahead 2.7 percent," Forsyth Barr Frater Williams executive director Don Turkington said.

Today Auckland Mayor John Banks said all proceeds from the sale would be used to reduce the council's "debt mountain".

Previously the council debt had been projected to be $371 million in 2005, but now that figure would be zero, he said.

Also contributing to the council's ability to pay back its debt is a $54 million capital repayment it received from the airport company, and $83 million from the sale of housing to the Government.

Councillor Bruce Hucker, spokesman for the eight councillors who opposed the sale, attacked the sale, saying the price achieved smacked of a fire sale.

"The council didn't get the top dollar for it and the kinds of discounts being talked about indicate that it's a bit of a fire sale," he told National Radio.

Mr Banks denied such claims, saying such suggestions came from people with little or no understanding of business or prudent financial management.

"We've just concluded an extensive international auction and we're told the price is in line with other sales of its type," Mr Banks said.

Information provided by the council said the decision to sell only half the shares was made because that was all that was needed to pay off the debt.

"We've kept our options open for the future and can take advantage of any future upside in the share price," the council said.

Council financial director David Rankin said the shares were being sold to about 55 institutions, of which about a quarter were from this country.

The council has undertaken not to sell its remaining 12.8 percent stake in the company for two years to protect the share price by removing uncertainty about what it intended to do with its shares.

Exceptions would be sales to a trade buyer, provided the purchaser agreed to honour the remainder of the two-year commitment, or in the case of someone making a code offer to all shareholders.

Pro-sale councillor Doug Armstrong said the sale was the best way of raising cash for major infrastructure investments in the city.

"We are in a huge growth phase. The population of the city is going to double by the year 2050 and we've got huge infrastructural investments to make."

Mr Banks today put the value of infrastructure needed in the next five years at $5 billion, mostly roads, with the council able to find $750 million of that from cashflow without increasing any debt.

Tolls would "logically" be a source of some other funding.

Shares in Auckland Airport last traded on Wednesday at $5.16, but sharebroking firms have valued the company at $5.80 to $6.10 a share.

The share's high point in the past year was $5.92.

Last month the company told its annual shareholder meeting it was on path for a record profit.

Revenue for the four months to October 31 was up 13.1 percent to $74 million, with the surplus after tax rising 20.2 percent to $25.25 million.

In the year to June, the company increased profits 21 percent to $71.5 million.

Comments from our readers

No comments yet