ACC to sell half of airport stake for $191 mln

By NZPA

Friday 6th December 2002

Auckland City Council has agreed 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.

The council first decided to sell its stake in the airport a year ago, following Sir William Birch's controversial report into cost-cutting, selling assets and more user pays.

Councillors confirmed that decision in June by a margin of 11 votes to seven, as part of a wider agenda to rid itself of "non-core" assets.

Income from the sale was earmarked for debt reduction and infrastructure improvement.

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.

Investment bank First NZ Capital co-ordinated a two-day "book-build" this week, soliciting offers from investors in this country and overseas.

Earlier a roadshow went around the world to drum up interest.

The sales effort was a duel-track process, with trade buyers -- those interested in owning and running an airport -- courted along with institutional investors, who would want much smaller portions of the company to add to their portfolios.

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

In the four months to October 31, international passenger movements had been 4.6 percent ahead of the previous year, with domestic passenger movements 5.3 percent ahead.

Revenue for the four months 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.

"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.

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.

"Our decision to sell our airport shareholding was based more on pragmatic reasons of debt reduction and things like that, rather than doctrinaire reasons that the city shouldn't be in that business."

Mr Armstrong said the sale of a strategic asset wouldn't leave the city in a vulnerable position.

"It is a strategic asset for the city, but that doesn't mean the city has got to own it.

"No-one's going to move the airport out of Auckland. It's still going to be the gateway to the city," he told National Radio.

He pointed to the fact that Auckland Airport's share register was dominated by offshore investors before today's selldown.

"That hasn't affected the brilliant operation of Auckland Airport in the last few years, which has seen the share price grow and so on."

Mr Armstrong said the sale also made sense from an investment point of view.

"We've got all our investment eggs in the one basket. Until just before the capital repayment, we had something like the thick end of $500 million, just about half a billion dollars, tied up in the airport -- and nothing else.

"Any prudent financial adviser would advise an investor to diversify their investment."

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