Australian airport investor Macquarie Airports (MAp) has rejected a management internalisation proposal made by Australian Football League chairman Mike Fitzpatrick, and has reaffirmed its intent to proceed with its current plan to bring its management team in-house in exchange for an A$345 million payout (€203 million; $289 million) to its current manager, Macquarie Group.
The details of Fitzpatrick’s proposal are unclear, but MAp’s responses to the proposal indicate that it involves a scenario in which MAp terminates its management agreement with Macquarie at no cost and instead hires Fitzpatrick’s team to manage the company at a maximum annual fee of A$45 million.
Trevor Gerber, lead independent director for one of MAp’s boards, said in an email to Fitzpatrick “it is not apparent that your ‘proposal’ is anything other than a job application for three people who the board does not know for positions that are not vacant with a cost of a minimum fee of $45 million”.
The board had previously rejected the proposal because it would expose MAp to too many uncertainties and risks triggering an involuntary termination of MAp’s management agreement with Macaquarie.
Under the terms of the management agreement, shareholders are entitled to displace Macquarie as manager by taking a vote and getting a simple majority to agree to sever ties with the Australian investment bank.
However, an involuntary severance of ties with Macquarie would trip change of control clauses that could potentially force it to refinance billions of debt for two of MAp's key airports, Brussels and Copenhagen. Another Macquarie-managed fund, the Macquarie European Infrastructure Fund, also has pre-emptive purchase rights on MAp’s stakes in the airports in the event of a change of control.
MAp has said that the proposed $345 million cash payment to Macquarie is the best option for MAp shareholders because it will ensure Macquarie’s cooperation with regard to the adverse change of control clauses. It will also ensure continuity of management, who will be brought in-house from Macquarie as part of the severance payment.
In related news, MAp said that Macquarie has agreed to use its entire A$345 million severance payment to cover any increases in debt costs for MAp that may result from the change of control in the first six months after the internalisation is completed. Macquarie had originally agreed to cover up to A$100 million of such costs, which apply to the existing debt facilities for Copenhagen and Brussels Airports.
MAp shareholders are to vote on the proposed management internalisation at a special general meeting scheduled for 30 September.