# Sydney Airport gets $16.7 billion buyout bid as investors take longer-term view on travel
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-07-05
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Sydney Airport $16.7B Buyout Proposal Takes Long-Term View
Meta Description: Infrastructure investors offer A$22.26 billion purchase of Sydney Airport, wagering on travel rebound post-pandemic. Potential largest airport deal in
URL: https://financedigest.com/sydney-airport-gets-16-7-billion-buyout-bid-as-investors-take-longer-term-view-on-travelhtml

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By Jamie Freed and Scott Murdoch

SYDNEY (Reuters) -A group of infrastructure investors has proposed one of Australia’s biggest-ever buyouts, a A$22.26 billion ($16.7 billion) purchase of Sydney Airport Holdings Pty Ltd, taking a longer-term view on the pandemic-battered travel sector.

The proposal comes as record-low interest rates prompt pension funds and their investment managers to chase higher yields. The purchase, with an enterprise value of A$30 billion including debt, would allow them to [reap financial benefits](https://www.financedigest.com/uk-tourism-sector-already-reaping-the-benefits-of-brexit.html "UK TOURISM SECTOR ALREADY REAPING THE BENEFITS OF BREXIT") when borders reopen and travel demand rebounds.

If successful, the [purchase of Australia’s biggest](https://www.financedigest.com/over-half-of-the-nation-is-making-the-biggest-purchase-decision-of-their-lives-based-on-a-feeling.html "Over half of the nation is making the biggest purchase decision of their lives based on a ‘feeling’ ") airport would be one of the country’s largest-ever by enterprise value in U.S. dollar terms, on par with the $22 [billion purchase of mall operator Westfield Group](https://www.financedigest.com/telecoms-group-orange-signs-sustainability-linked-refinancing-of-6-billion-euros-syndicated-credit-facility.html "Telecoms group Orange signs sustainability-linked refinancing of 6 billion euros syndicated credit facility") by Unibail-Rodamco in 2017, Refinitiv data showed.

It would also rank as the eighth-biggest deal globally this [year and the second-largest airport](https://www.financedigest.com/heathrow-airport-says-return-to-pre-pandemic-demand-years-away.html "Heathrow Airport says return to pre-pandemic demand years away") purchase, behind the $30.2 billion buyout of Britain’s Heathrow Airport in 2006.

The Sydney Aviation Alliance – a consortium comprising IFM Investors, QSuper and [Global Infrastructure Partners – has offered A$8.25 per Sydney Airport share](https://www.financedigest.com/global-splined-sleeves-market-size-share-trend-growth-forecast-to-2031.html "Global Splined Sleeves Market Size, Share, Trend & Growth Forecast To 2031"), a 42% premium to the stock’s Friday close.

The news sent the [stock up as much as 38% to A$8.04 in early Monday trade](https://www.financedigest.com/stock-trading-platforms-for-beginners.html "Stock Trading Platforms for Beginners"), though it later retreated to around A$7.55, indicating market uncertainty as to whether the deal will succeed.

Sydney Airport noted the offer was below its pre-pandemic share price and said it would review the proposal, which is contingent on granting due diligence and [recommending it to shareholders](https://www.financedigest.com/hsbc-board-recommends-shareholders-vote-against-spin-off-resolution.html "HSBC board recommends shareholders vote against spin-off resolution") in the absence of a superior offer.

The airport operator’s share [price hit a record A$8.86 in January](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc.html "UK shop price inflation hits record 8% in January: BRC") last year, before the novel coronavirus pandemic led to a collapse in travel demand.

SEEKING [HIGHER YIELDS](https://www.financedigest.com/wall-st-indexes-mixed-treasury-yields-tick-up-as-higher-rates-loom.html "Wall St indexes mixed, Treasury yields tick up as higher rates loom")

The company is Australia’s only [listed airport](https://www.financedigest.com/greece-considers-listing-30-stake-in-athens-airport.html "Greece considers listing 30% stake in Athens airport") operator. A successful [deal would bring its ownership in line with the country’s](https://www.financedigest.com/eu-countries-eye-deal-on-more-energy-measures-within-weeks.html "EU countries eye deal on more energy measures within weeks") other major airports which are owned by consortia of infrastructure investors, primarily pension funds.

Australia’s mandatory [retirement savings](https://www.financedigest.com/student-loans-hurting-workers-ability-to-save-for-retirement.html "STUDENT LOANS HURTING WORKERS’ ABILITY TO SAVE FOR RETIREMENT") system, known as superannuation, has assets of A$3.1 trillion, according to the Association of Superannuation Funds of Australia.

With record-low interest rates, funds are looking at [infrastructure investments](https://www.financedigest.com/invest-in-infrastructure-to-escape-the-starvation-cycle-warns-leading-nonprofit-sector-strategist.html "Invest In Infrastructure To Escape The ‘Starvation Cycle’, Warns Leading Nonprofit Sector Strategist") for higher yields.

It’s the right timing to be looking at these assets which have got a 75-year life when conditions are arguably at the bottom,” said a Sydney Airport [investor who declined to be named because the person’s firm was still assessing](https://www.financedigest.com/dollar-tentative-as-investors-assess-rate-hike-path.html "Dollar tentative as investors assess rate-hike path") the proposal. “It’s opportunistic in that regard, but understandable.”

[Australia’s international borders are widely expected to remain closed until at least the end of the year due partly to a slower vaccination](https://www.financedigest.com/outcry-as-australia-bars-djokovic-over-vaccination-status.html "Outcry as Australia bars Djokovic over vaccination status") programme than in most developed countries.

Domestic [travel has also been disrupted](https://www.financedigest.com/factbox-europes-ongoing-strike-related-travel-disruptions.html "Factbox-Europe’s ongoing strike-related travel disruptions") by a two-week lockdown in Sydney during the normally busy school holiday period, after an outbreak of the highly contagious Delta variant of COVID-19. Other states have closed borders to Sydney residents.

In May, Sydney Airport’s international traffic was down more than 93% versus the same month of 2019, while domestic traffic was down 39.2%.

The airport has long held a monopoly on traffic to and from [Australia’s most populous city](https://www.financedigest.com/australia-drops-landmark-criminal-cartel-case-against-citi-deutsche.html "Australia drops landmark criminal cartel case against Citi, Deutsche"), but that is due to end in 2026 with the opening of Western Sydney Airport.

Sydney Aviation [Alliance said it did not anticipate making substantive changes](https://www.financedigest.com/from-boom-to-bottom-and-now-big-change-renault-and-nissan-reshape-alliance.html "From boom to bottom and now big change: Renault and Nissan reshape alliance") to the airport’s management, services, operations or target credit ratings.

IFM holds [stakes in major](https://www.financedigest.com/deutsche-telekom-reaches-majority-stake-in-t-mobile-u-s-ceo.html "Deutsche Telekom reaches majority stake in T-Mobile U.S. – CEO") airports in Melbourne, Brisbane, Perth and Adelaide. QSuper owns a stake in Britain’s Heathrow Airport whereas Global Infrastructure is [invested in that country’s Gatwick and London City](https://www.financedigest.com/buyers-shun-city-centres-for-country-villas-when-it-comes-to-lifestyle-investment-in-iberia.html "BUYERS SHUN CITY CENTRES FOR COUNTRY VILLAS WHEN IT COMES TO LIFESTYLE INVESTMENT IN IBERIA") airports.

Their offer is contingent on UniSuper, Sydney Airport’s largest [shareholder with a 15% stake](https://www.financedigest.com/intercos-fund-shareholders-l-catterton-otpp-sell-6-stake-at-7-discount.html "Intercos fund shareholders L Catterton, OTPP sell 6% stake at 7% discount"), agreeing to reinvest its equity interest for an equivalent equity holding in the consortium’s vehicle.

UniSuper, which also holds stakes in Adelaide and Brisbane airports, said it was not a [consortium partner](https://www.financedigest.com/synechron-partners-with-r3-in-one-of-the-largest-distributed-ledger-consortium-projects-of-the-year.html "Synechron Partners with R3 in One of the Largest Distributed Ledger Consortium Projects of the Year") nor privy to any details outside information disclosed publicly.

“UniSuper does however, in-principle, see merit in Sydney Airport being converted from a publicly listed company to an unlisted company. UniSuper also has a favourable view of the consortium [partners,” the fund](https://www.financedigest.com/nissan-pushes-partner-renault-to-sell-down-stake-may-raise-funds-source.html "Nissan pushes partner Renault to sell down stake, may raise funds -source") said.

($1 = 1.3294 [Australian dollars)](https://www.financedigest.com/asian-stocks-make-7-month-highs-australian-dollar-gains-on-hot-inflation.html "Asian stocks make 7-month highs, Australian dollar gains on hot inflation")

(Reporting by Jamie Freed in Sydney and Scott Murdoch in [Hong Kong; Additional reporting by Byron Kaye in Sydney and Nikhil Kurian Nainan and Soumyajit Saha in Bengaluru; Editing Stephen Coates and Christopher Cushing)](https://www.financedigest.com/evergrande-winding-up-lawsuit-in-hong-kong-adjourned-to-nov-7.html "Evergrande winding-up lawsuit in Hong Kong adjourned to Nov 7")


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