Auckland International Airport says discussions with the CPP Investment Board in relation to a proposal for CPPIB to acquire a significant interest in Auckland Airport have ceased.
A majority of directors say they do not believe that pursuing the proposal would be in the “best interests” of shareholders or the company and therefore will not be recommending the proposed transaction.
The proposal would have involved an amalgamation and the creation of a newly listed airport company and under the deal, the CPPIB would have owned between 39% and 49% of this new company.
The board of directors believed that the proposal would introduce an unacceptable increase in risk which would most likely impact the long-term value and prospects of the company in the future.
One area of concern, says the company, was the significant increase in the level of debt within the CPPIB proposal which would have seen its debt move from to NZ$2.6 billion within five years, up from $911 million at the end of June.
“In addition,” says an Auckland International Airport statement, “the terms of the new securities and the debt financing proposed by CPPIB would have reduced the company’s financial flexibility and imposed stringent ‘ring-fencing’ requirements limiting the company’s ability to grow its business in line with its strategic plan.”
The CPPIB says it is disappointed that the airport’s board did not recommend its proposal or give the company’s shareholders the opportunity to consider and vote on the matter after being provided with complete information about the proposal.
It is in the process of considering all of its options and will not make further comment at this time.
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