Not surprisingly, the Government has declined the $1.75 billion bid for a 40% stake in Auckland International Airport (AIA) by the Canada Pension Plan Investment Board (CPP), which was offering $3.60 per share, on the grounds it was not to the benefit of New Zealand.
AIA shares immediately dipped 8.5%, or 20c, on the news to $2.15. By the end of trading yesterday they closed down at $2.13, on near record volumes of 19.3 million shares worth $41.7 million.
AIA is the major tourism gateway for the country and is a strong dividend earner. It has plenty of growth potential and massive land-bank holdings.
Earlier takeover offers had raised resentment that foreign ownership could mean the stripping of earnings or assets and little incentive to grow the company.
The National Party said the Government was playing reckless politics, having gone against the advice and recommendation of the Overseas Investment Office, and vetoed CPP buying a stake in AIA, NZPA reported.
National Party leader John Key said the decision was blatantly political and Act New Zealand said the Government had botched its handling of the case.
However, New Zealand First welcomed the decision.
ABN Amro Craigs broker Peter McIntyre was not surprised Land Information Minister David Parker and Associate Minister Clayton Cosgrove had jointly declined the CPP application.
‘‘Given the Government had set the platform, with changes to stapled securities and not selling strategic assets, I can't understand why it should be a shock to the market,'' he said of the initial sell-down of shares yesterday.
Toronto-based CPP released a brief statement yesterday, stating its disappointment in the decision and confirming the offer had now lapsed.
About 29,000 shareholders had conditionally agreed to accept the CPP offer.
The Government initially intervened earlier in the year when CPP's bid started to gain shareholder traction.
In February, it stopped CPP using stapled securities as a tax sweetener for investors, then in early March it rushed through special regulations imposing controls on foreign ownership of major strategic assets infrastructure on sensitive land in New Zealand.
Following the second Government intervention, AIA shares were hammered to the tune of almost $600 million, or a 20% drop in value. However, in a surprise move just hours after the sell-down started, CPP issued a statement saying it would continue with its offer, prompting the ministers to make a decision.
Yesterday, Mr McIntyre said the key message to take from the decision was that it would be very hard for overseas consortiums to take proportional ownership of key New Zealand assets.
However, he noted the negative side to the decision was that the country needed overseas investment because of the poor maintenance of major infrastructure assets in the past.
Mr Parker's brief statement said that in line with normal protocol on Overseas Investment Act decisions, he would not make further comment.