NEW ZEALAND - Falling stocks have caused Auckland Airport's directors to make a U-turn, recommending that shareholders sell into the takeover offer from the Canada Pension Plan Investment Board (CPPIB).
A majority of the airport board maintained their recommendation for shareholders to vote against the partial takeover offer as they believed the shares in the company were likely to be worth more in the longer term without CPPIB involvement.
For the transaction to proceed, the Takeovers Code requires a majority of shareholders who vote to approve CPPIB acquiring a 40% stake. If this approval is not gained, the bid cannot proceed, regardless of the number of shares offered for sale.
Tony Frankham, chairman of the board, said all the directors had carefully considered whether to revise their advice to shareholders on both elements of the transaction in light of the change in financial markets.
"All directors acknowledge that the market conditions have changed significantly since this bid was announced and this key factor has given rise to the need for directors to update their earlier recommendations," he said.
"We all agree that shareholders would be unwise not to realise part of their holding at the favourable partial offer price if the partial offer receives approval to proceed."
However, Frankham added that the directors who continued to recommend that shareholders object to the takeover, were of the view that the long term value of Auckland Airport had not fundamentally changed.
He said: ""They regard Auckland Airport as a strategic asset with long term horizons and consider ownership should not be determined by shorter term market fluctuations.
"They believe that over the longer term the value of Auckland Airport shares is likely to be greater without CPPIB having a 40% stake which gives it effective control."
He said the directors that were recommending shareholders vote in favour of the partial takeover believed that the price offered by CPPIB to shareholders for some of their shares was unlikely to be available for the foreseeable future.
He said: "They believe that the partial offer of $3.6555 per share (less the 5.75 cents per share interim dividend to be paid next month) is even more attractive today, at a time when shareholders are faced with uncertain global conditions that may continue for some years to come.
"The impact of those conditions does in their view put downward pressure on the valuation of the company and given global economic conditions, a more favourable offer in all aspects is unlikely to be available to shareholders in the near term."
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