Sydney Airport rejects IFM-led consortium’s A$22.3bn takeover bid

Citing the short-term impact of the pandemic, the airport’s board says the offer undervalued the asset and was not in the best interests of securityholders.

Sydney Airport has rejected a A$22.3 billion ($16.6 billion; €14.0 billion) takeover bid by a consortium led by IFM Investors.

Following last week’s unsolicited, indicative, conditional and non-binding proposal from the consortium known as the Sydney Aviation Alliance – comprised of IFM, QSuper and Global Infrastructure Partners – Sydney Airport’s board announced the offer to acquire the airport was not in the best interests of securityholders.

The consortium had proposed to acquire all stapled securities in the airport at an indicative price of A$8.25 cash per stapled security, via a scheme of arrangement and trust scheme, which the board found ultimately undervalued “one of Australia’s most important infrastructure assets”, according to a statement from Sydney Airport.

The company also highlighted the short-term impact of the covid-19 pandemic on the airport’s performance and the “opportunistic timing” of the offer, pointing out: “The indicative price is below where Sydney Airport’s security price traded before the pandemic.

“The boards recognise that the security price is likely to trade below the consortium proposal’s indicative price in the short term, however Sydney Airport will only progress a change in control transaction on terms that deliver and recognise appropriate long-term value for Sydney Airport securityholders,” Sydney Airport said.

While Sydney Airport shares traded at A$8.97 on 6 December 2019, its shares previously traded at A$8.06 on 5 July 2019, lower than the consortium’s offer price. On 1 July 2021, the airport’s shares traded at A$5.75.

In a statement, the consortium said it was “surprised and disappointed” by the boards’ decision.

“The consortium believes that the proposal… represented an extremely attractive offer for securityholders given the considerable short and long-term challenges faced by Sydney Airport,” it said, adding: “Any assessment of Sydney Airport security prices before the pandemic is of limited relevance given the company’s materially changed circumstances and challenging outlook.”

The consortium also highlighted reductions in demand resulting from the pandemic, the expected introduction of a competitor airport in western Sydney in 2026 and lasting changes to travel preferences as further factors likely to hinder Sydney Airport’s future performance.