Sydney Airport, the target of a consortium of infrastructure managers and superannuation funds trying to take the company private over the past month, is playing hard to get in a tussle that could eventually bring the global pandemic's impact on airport valuations into sharper relief.
On Aug. 16, the board of the Australian stock exchange-listed company dismissed the consortium's offer of A$8.45 ($6.21) per "stapled security," or share, just over a month after saying an initial A$8.25 bid failed to reflect the airport's long-term value.
The consortium responded by insisting its bids offered securities holders full value in light of the pandemic's short- and longer-term impact on the airport's business.
For the July bid, the so-called Sydney Aviation Alliance was composed of two funds managed by IFM Investors, Sydney; Global Infrastructure Partners, New York; and A$93 billion super fund QSuper, Brisbane. AustralianSuper, the A$225 billion, Melbourne-based super fund, joined the group for the subsequent bid.
Analysts judged the bids to be reasonable.
While the initial A$8.25 pershare — or A$22 billion — offer was below Sydney Airport's pre-pandemic price range of A$8.60 to A$9.05, it represented a 42% premium to where its shares were changing hands before the bid came to light, noted Richard Jones, Sydney-based Australia infrastructure and transport equity analyst with J.P. Morgan Securities Australia Ltd., in a recent report.
At first glance, he said, it "appears to be a fair offer."
Alexander Prineas, Sydney-based transportation equity analyst with Morningstar Inc., contended "the proposal has reasonable odds of success," even as he cautioned that the process is likely to be a drawn out.
Frederic Blanc-Brude, CEO of Singapore-based EDHECinfra affiliate Scientific Infra Pte. Ltd., said the consortium's A$8.45 bid points to an enterprise value-to-EBITDA multiple of 23 times the company's pre-pandemic earnings levels, well within the 18-to-26 range for top-quartile airports in his company's benchmark index of privately held infrastructure assets.
At that level, he wrote in a recent LinkedIn post, the bid is "high but not crazy high." In a debate that will revolve around whether the fallout from the global pandemic will prove temporary or more permanent, the airport's board is clearly holding to the line that the longer- term impact of COVID-19 won't be material, he said.
"When we see a trade, then we'll know how the market values the future" for airports, which account for only 5% of the 550 infrastructure assets in the EDHECinfra broad market index but 15% of its roughly $310 billion market cap, Mr. Blanc-Brude said in an interview.