Is another Auckland Airport bid likely under a business friendly Government?

Update: Read January 2012 rumour about Airport takeover 

Is Auckland International Airport set for M & A activity?

Its time for some not so idle speculation.

With the new National Government in place and the current relaxing of the rules around the RMA, the major planning law that has stopped economic development of New Zealand, we could expect to see developments in other areas of business in regards to relaxing laws and legislation to allow business to flow quicker and therefore more efficiently and more profitably.

A case in point that I would like to regurgitate is the fiasco that ended last year when it was vetoed by the then Labour administration, after over a year of political wrangling, the Auckland International Airport [AIA.NZ] sale saga.

Two suitors were vying for a slice of New Zealand's largest airport, first Dubai Aerospace Enterprise (DAE), then the Canadian Pension Plan Investment Board (CPPIB).

Both these bids eventually failed.

Both DAE and CPPIB were knocked back for no other than petty political reasons.

After these two bids failed Lloyd Morrison, through his company Infratil [IFT.NZ] and a partnership with the NZ Super Fund, accumulated around 9% of AIA.

Morrison also owns a majority stake in Wellington Airport and was behind a failed proposal to build a second airport in Auckland.

The thing is, since the relaxing of relevant business legislation one might expect the National Government's attitude to allowing private enterprise to do business freely, therefore opening up the possibility of another bid for the Airport-either by one or both of the spurned suitors or from Infratil.

The only impediment is the obvious funding problems now that credit is difficult to obtain.

However, The one most likely to bid would be DAE, because it is backed by massive oil derived financial backing and because Auckland Airport would be strategic to its global plans to expand its infrastructure.

It is interesting to speculate and this scenario isn't that far fetched.

AIA shares have added around 10% over the last few weeks.


Disclosure: I own AIA shares

AIA @ Share Investor

Is Auckland International Airport set for M & A activity?
Share Investor Q & A: Auckland Airport's Simon Moutter
Auckland Council look set for a Auckland Airport Takeover
Auckland City Council new AIA Policy Doc
Make me an offer I cant refuse: Auckland International Airport Ltd
Long Term View: Auckland International Airport
VIDEO - Simon Moutter on Australian Airport Purchase
Auckland Airport Capital Raising a fair call
Auckland International Airport lands Australian Ports
What Infratil sale of Auckland Airport stake means
Is another Auckland Airport bid likely under a business friendly Government?
Latest Airport coverage
Cullen's move on Auckland Airport has far reaching effects
Cullen's move on AIA tax plan Anti-Business
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?


Queenstown Airport Buyout @ Share Investor

Queenstown Airport: Queenstown Airport Update
Auckland Airport CEO on Queenstown Airport Fracas
Queenstown Airport: Court Case looks set to Drag
Queenstown Airport: Loud Voices & Loyalty
Queenstown Airport: Air New Zealand's Crocodile Tears
Queenstown Airport: AIA purchase good Long-Term but will cost shareholders Short-Term

Discuss this Stock @ Share Investor Forum - Register free
Download AIA Company Reports

Think Bigger: How to Raise Your Expectations and Achieve Everything
By Michael Hill

c Share Investor 2009

Share Investor's Friday Free for all: Edition 2

Xmas comes early for Warehouse Shareholders

An announcement today from The Warehouse(WHS) New Zealand's Largest retailer, that they will be paying a large special dividend of $NZ 35c imputed per share along with a 5.5c normal dividend will have shareholders running to the bank.

It seems the proceeds from sale of their Australian unit plus some other property sales sees the company flush with some $109 million in cash and owners are going to benefit. The share price was up 14c on modest volume today possibly reflecting the markets lack of faith in the retailing sector given Bricoes (BGR) 16% fall in profit announced today.

It is a shame more companies don't have good capital management such that The Warehouse is operating. Many would have the 109M burning a hole in their pockets looking for a place to spend it.

Sky City(SKC) Entertainment take note when considering what to do with proceeds from mooted asset sales late in 2007 and early 2008.

Auckland Airport Merger Crashes and Burns

The original Dubai Aerospace, DAE, merger with Auckland International Airport(AIA) took a nosedive this week.

In the face of rampant idealist pressure from leftist councils and Central Government the proposal was dead in the water. It was never a flyer to begin with for manifold reasons, mainly due to the fact that the company was a foreign one.

DAE is rumored to be stitching together another more politically palatable deal and a Canadian pension fund is said to be about to launch a concrete bid soon.

Any deal is going to be almost impossible considering there are politicians with big egos and tiny reproductive parts involved.

My speculation would be if Dick Hubbard from Auckland City Council gets re-elected(god help us!) and Manukau Council continues to lean left after October this year then we could see councils combining to re-purchase the airport. Perhaps not a likely scenario but I think the most likely in the face of other proposals.

Finance Company woes Hound Investors

Two more Finance companies went up in smoke this week, bringing the grand total over the last 16 months to 9 and well over NZ$ 1 Billion at risk of being lost.

Fingers continue to be pointed at everyone but those most to blame. Directors of such companies and those that "invested" in them.

A curious excuse was given by the liquidator of Nelson based LDC Finance for its collapse. It seems said liquidator blamed investors for pulling out funds because of market nervousness over finance company collapses.

He conveniently forgot to mention that the company he was in the process of liquidating took call deposits and used them to invest in long term situations. Well duh., it was bound to come unstuck sooner or latter.

Blue Chip Debt fails the risk test

Following in the rumblings of the sub prime meltdown in the United States, New Zealand companies issuing debt securities to pay for business expansion have been left high and dry by fed up Kiwi investors. The Canadian School Teachers Pension Fund, who bought Telecom NZ's Yellow Pages unit this year for NZ$ 2.2 Billion were initially after $300 Million from Kiwi investors at 11% then scaled back twice before being scrapped earlier this week.

I suspect the fund wanted more than the original amount but market sentiment propelled them to scale it back. When they purchased Yellow Pages, market appetite for such debt was at an all-time high. They would have been counting on that appetite to continue when it came for them to fund their purchase.

A hint of desperation also surrounds the issue by Origin Energy, Contact Energy's(CEN) main shareholder, of preference shares with an initial 10% yield.

I have been called twice and offered to buy into this issue. Once by my Broker, ASB Securities and once by the bank that owns the broker ASB Bank. Never before have I been "hounded" in this way. I said no.

Power to the People

Not to let any opportunity go by to bash Helen Clark and her sisters in power or without power in this case.

The case for New Zealand to have nuclear power has never been stronger.

The ideological bent by the New Zealand Labour Party for the country not to use its coal and hydro assets to produce much needed electricity is only matched in stupidity by the same collective ideology that would have them oppose nuclear energy.

Labour's answer to New Zealand's power crisis is to use windmills and solar power, forgetting of course that wind the doesn't always blow (unless you are a parliamentarian) and the sun doesn't always shine(unless you are a Green Party member after your daily spliff)

Kiwi business needs cheap, reliable and plentiful supplies of power to push the economy ahead and for business to have the confidence that they are able to expand with the knowledge that the extra power is there when it is needed.

Slow food

The listed fast food company Restaurant Brands(RBD) is still looking for a leader after more than six months without one.

With news this week that one will be appointed sometime next month share investor wonders-with tongue firmly planted in cheek- whether the ex-chief of Telecom New Zealand(TEL) might be one of the contenders shortlisted.

On second thoughts, perhaps even RBD do not deserve someone so lacking in business acumen and forward planning.

I'm still available.

Burger Fuel(BFW) the listed gourmet burger wrangler, has failed to have its shares trade at all this week.

Watching the share price of this company could get more exciting next week. Yeah right!

Seriously though,this is going to be a market announcement driven stock price in the absence of any material facts and figures about how the business is doing.

Capital would have dried up though and their initial plans would have had to change.

Meanwhile the owners of Hell Pizza and Burger King, one of RBD's competitors for their Pizza Hut brand , have had a stoush with their ad company.

Cinderella Marketing, the advertising company that pursues guerrilla-style marketing promotions - including a condom letterbox drop depicting Hitler and a brazen magazine called Hell-o - are credited with making the brand stand out from bigger fast food competitors.

It seems the brazen advertising has finally got too much for Hell's owners. Was it the condoms or the Hitler references and why did it take so long for the owner of Hell to reject the brazen ad placements?

Market Wrap up

The benchmark NZSX-50 index closed up 11.88 points, or 0.3 per cent, at 4151.98, on turnover totalling $101.8 million.

The big mover today was The Warehouse(WHS) which jumped 2 per cent to 588 on the news of a special dividend of 35c a share totalling $109 million.

Auckland Airport(AIA) was still in play, as suitors such as the Canada Pension Plan Investment Board have been rumored to be making a bid soon.

Auckland Airport shares closed up 2c at 309.

Telecom (TEL)was up a cent at 438, Fletcher Building(FBU) gained 6c to 1191, Contact Energy(CEN) rose 14c to 915, Fisher & Paykel Healthcare (FPH)was up 5c at 355 after announcing new sleep apnoea products this week, and F&P Appliances(FPA) was flat at 367.

Briscoe Group(BGR) was flat at 151, reflecting consideration by the market that their profit drop announcement today was already priced in after reporting a 12 per cent fall in half-year net profit to $10.5m, as competition hit margins.

Among rising stocks, Cavalier Carpets(CAV) was up 9c at 321, Nuplex(NPX) gained 11c to 700, PGG Wrightson(PGG) was up 9c at 193, and Michael Hill(MHI) rose 15c to 1015.

Air New Zealand(AIR) lost 2c to 215 after earlier this week announcing a large special dividend, Sky City(SKC) fell 2c to 441, Vector(VCT) was down 4c at 241, and NZX (NZX)fell 5c to 975.

Lion Nathan(LNN) 5c lower at 1100, and Goodman Fielder(GFF) down 12c at 308.

Disclosure: I own SKC, GFF, FPH ,AIA shares

c Share Investor 2007

Share Investor's Friday Free for all

Airport Merger with DAE finally crashes

The merger of Auckland International Airport(AIA) with Dubai Aeronautical Enterprise (DAE) has hit crosswinds with DAE finally realising that their deal to control around 60% of the company looking like it is about to crash and burn.

DAE said legal action filed by Air New Zealand seeking a judicial review of AIA's landing charges constituted a "prescribed occurrence" under the terms of the merger agreement.

DAE have stated if the parties were unable to come to an agreement by the end of five working days of mutual talks, either party could terminate the merger agreement.

As many, including myself have commented DAE look likely to fly the coop.

There are other prospective buyers of AIA in the wings and there is a possibility that a Canadian Pension Plan maybe ready to launch a bid.

Shares ended down to NZ$3.02 on the news today.

Don't leave town or sell your shares yet.

Finance Companies Folding

Finance companies continued to collapse with gay abandon this week. Five Star Consumer Finance disappeared with $80 Million and today a subsidiary of Dorchester Finance was wound up by Dorchester directors.

Dorchester claim the parent company isn't in trouble but we have heard that before haven't we.

The Securities Commission has asked all finance companies to respond to them with a state of their affairs. 18 stragglers were the last to report at 6.30pm today but we have yet to hear the health or otherwise of these companies. It looks likely that we will hear of others going south next week.

Micheal Cullen, the Labour Minister of Finance, has come out to reassure the public that the Finance company mess hasn't spread to the banking sector. His comments are far from reassuring. They scare me.

Two Titans bow out

Sir James Fletcher , the driver behind the incredible growth of Fletcher Challenge from the 1940s-1980s bowed out this week.

Born into privilege and wealth James Fletcher took the reins of his fathers building company in the mid 1940s and turned it into what was to become one of New Zealands largest companies.

His management style , capacity for hard work and ability to communicate with and respect people are aspects of upper management that are sadly lacking, with a few notable exceptions, in this country today.

Nick Nobilo, the founder and head of Nobilo Wines will be remembered for introducing New Zealanders to wine and also for transforming large areas of West Auckland into quality Vineyards where exports of his product have now become commonplace.

Another hard grafter, this immigrant had a vision, had a backbone and got down and let his hands get dirty. Sadly these traits seem to be missing from many of us today.

Burger Fuel share price rises

Josef Roberts explained to me this week that his companies share price was dropping because of poor liquidity and negative world markets. The price was trading at .65c at the time. Burger Fuel shares were up to 70c yesterday and closed today at the same price. Go figure.

Wasted Opportunities

Transpacific Industries, the Australian parent of Waste Management, reported a 117 per cent rise in net profit on the back of a year of aggressive expansion.

Transpacific, an Australian company, bought Waste Management a few years back at what alot of market commentators and directors of Waste Management said was a good price for shareholders. I was one shareholder who thought the price paid was poor and clearly I didn't want to sell.

My stance was vindicated with today's Transpacific announcement.

A shame my detractors seem silent now and so are the former directors of Waste Management.

Short term thinkers can only see just that. Short term.

NZX finishes up

The benchmark NZSX-50 index closed up 0.3 per cent, or 11.37 points, at 4118.97.

Contact Energy(CEN) was down 12c at 915 after swinging very wildly this week and reporting a good profit. Fisher & Paykel Healthcare(FPH) was down 2c at 338, F&P(FPA)Sky Television TV(SKT) shed 3c to 558.

Port of Tauranga (POT) lost some of yesterday's gains to close down 10c at 700 after reporting a stellar profit increase yesterday, Air New Zealand(AIR) rose 5c to 206, Freightways(FRE)was up 5c at 395, and Mainfreight(MFT) lost 2c to 707.

Sanford (SAN) was up 15c at 455, Tower(TWR) rose 7c to 231, Rakon(RAK) was up 7c at 489, and The Warehouse(WHS) rose 3c to 564.

ANZ shed 60c to 3350, Westpac was up 45c at 3145, AMP gained 14c to 1215, Lion Nathan(LNN) rose 5c to 1055, and Goodman Fielder(GFF) was up 10c at 300 after earlier this week reporting a solid profit result. It is at near historical highs.

Till next week.

*Disclosure: I own AIA, FRE, FPH,GFF, MFT, SKC, Shares

c Share Investor 2007

Dubai Aerospace Enterprise Move on Auckland Airport: Will It Fly?

There has been much written about the recently announced "merger" of Dubai Aerospace Enterprise (DAE) with Auckland international Airport Ltd [AIA.NZX]

Let me give you my take.

DAE have offered the equivalent of $NZ 3.80 per share in quite a complex merger proposition that values AIA somewhere north of $NZ 5 billion in its entirety. This is substantially more than what the company was valued at before rumours of potential buyers started coming out of the woodwork a few months back. It was consistently trading at around the 2.20-2.40 range.

The hurdles that this merger proposition have to overcome are those that a midget would have trouble getting over even if he was thrown by a tall man.

Two city councils, Auckland and Manukau City, between them own almost 25% of the airport. Manukau Mayor Barry Curtis said they "wont sell" and the Auckland City Mayor, Dick Hubbard, has put proposals to be aired and voted on, one of the proposals includes ACC buying more AIA shares. It looks unlikely that these two shareholders will come to the party and sell, even at an increased offer.

The merger is also facing the wrath of other local and national politicians and the consensus of those in power and public opinion seems to be overwhelmingly in favour of don't sell. Public pressure against a sale is bound to resonate with a Labour Government wanting a 3rd term in 2008, its constituency would be overwhelmingly against such a sale.

The unpopularity of the AIA sale in the public's eyes focuses on the fact that they don't want to see a valuable "strategic" asset flogged off to any overseas company. Ironically though AIA is already owned 33% by foreign shareholders.

There are some, including yours truly, who have mentioned the obvious threat to national security that a bid from a Muslim backed company brings. We are reminded of last year when DAE was forced to relinquish ports bought in the US for similar security reasons. This itself alone is a good reason to block the sale of AIA to DAE.

I have no problem with AIA being sold to anyone else, foreign or local and in fact there is rumoured to be at least another seven possible buyers for AIA assets with a handful currently doing due diligence, among them are Melbourne airport owner, Australia Pacific Airport, Macquarie Airports and Canada Pension Plan. The last is said to be close to launching a bid.

The only problem that I see is price. While the offer by DAE is considerably more than historical AIA value placed on the company by the market AIA is a very attractive asset.

It is in a monopoly position, has one of the highest profit margins for any airport in the world and is highly undeveloped compared to foreign airports.

It is this undeveloped nature of the business that must seem the most attractive proposition to potential bidders. It is for me as a shareholder and I intend to hold long-term for that reason alone.

There are vast tracts of undeveloped land with uses for ancillary services for the airline business, retailing and hotel potential and a myriad of other possibilities. In fact AIA was discussing the possibility 2 or 3 months back of splitting the land/retail based assets of the business from airport business and trading the two entities separately on the NZX. That is where the value lies.

In my opinion the sale of AIA looks unlikely to anyone but when you have interventionist local and national politicians involved in public companies you never know what is going to happen. A couple of years ago Ports of Auckland, a publicly listed company, was bought by the Auckland Regional Council and delisted and before that Air New Zealand was grabbed by the State "in the interests of the country"

AIA CEO says the DAE offer "should be accepted by shareholders in the absence of another offer" but he himself has undervalued the very company he presides over and its shareholders.

Long-term the company is worth much more.

Disclosure: I own AIA shares

AIA @ Share Investor

Is Auckland International Airport set for M & A activity?
Share Investor Q & A: Auckland Airport's Simon Moutter
Auckland Council look set for a Auckland Airport Takeover
Auckland City Council new AIA Policy Doc
Make me an offer I cant refuse: Auckland International Airport Ltd
Long Term View: Auckland International Airport
VIDEO - Simon Moutter on Australian Airport Purchase
Auckland Airport Capital Raising a fair call
Auckland International Airport lands Australian Ports
What Infratil sale of Auckland Airport stake means
Is another Auckland Airport bid likely under a business friendly Government?
Latest Airport coverage
Cullen's move on Auckland Airport has far reaching effects
Cullen's move on AIA tax plan Anti-Business
AIA profit stays grounded
Softening opposition to CPPIB bid for AIA
Directors of AIA bribe brokers not to sell
What is Auckland Airport worth to you?
Second bite at AIA by CPPIB might just fly
AIA new directors must focus on shareholders
Auckland Airport merger deal nosedives
The Canadians have landed
AIA incentive scheme must fly out the window
Government market manipulation over AIA/DAE deal
DAE move on AIA: Will it fly?


Queenstown Airport Buyout @ Share Investor

Queenstown Airport: Queenstown Airport Update
Auckland Airport CEO on Queenstown Airport Fracas
Queenstown Airport: Court Case looks set to Drag
Queenstown Airport: Loud Voices & Loyalty
Queenstown Airport: Air New Zealand's Crocodile Tears
Queenstown Airport: AIA purchase good Long-Term but will cost shareholders Short-Term

Discuss this Stock @ Share Investor Forum - Register free
Download AIA Company Reports


Steve Jobs Biography - By Walter Isaacson





c Share Investor 2007