DEALTALK-Bid for NZ's Auckland Airport to scrape through

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By Adrian Bathgate

WELLINGTON, March 13 (Reuters) - After a dramatic week the NZ$1.8 billion ($1.45 billion) partial takeover of New Zealand's main gateway Auckland International Airport (AIA.NZ) by a Canadian state pension fund looks set to scrape over the line.

As shareholders swing in behind the bid, focus has switched to whether the government will approve the deal, following a concession made by the Canadian Pension Plan Investment Board in its NZ$3.5980 a share offer for a 40 percent stake.

It is a swift turnaround for a bid that looked dead in the water only a week ago after the government closed a tax loophole and tightened foreign investment rules.

A crucial turning point came on Tuesday when 3.3 percent shareholder, utilities investor Infratil Ltd (IFT.NZ), seen as a barometer of sentiment, said it would sell.

"Infratil's decision to vote in favour of CPPIB's partial offer, in all likelihood, assures the success of the bid," ABN Amro analyst Geoff Zame said in a note to clients.

Shares in Auckland Airport, a top-10 company that controls 70 percent of New Zealand's international air traffic, were up 7.3 percent at NZ$2.35 by 0200 GMT on Thursday.

The deal closes at 5 p.m. (0400 GMT) on Thursday, with initial results expected to be available on Friday. In addition to gaining 40 percent of shares, CPPIB needs to gain approval from a majority of voting shareholders.

CPPIB's offer values Auckland Airport at 22 times 2007 earnings before interest, tax depreciation and amortisation (EBITDA), compared with a global average compiled by CPPIB for listed airports of 12.4 times.

The harshest blow to the bid came on March 4, when Auckland Airport shares plunged 20 percent after the government said it would tighten rules around overseas investors gaining control of so-called sensitive assets - a move taken as a clear indication of government opposition.

That followed a Feb. 26 move to give stapled securities, which include debt, the same tax treatment as ordinary shares, preventing companies from offering tax-deductible payments. This formed a key part of a capital restructuring proposal to be put forward by CPPIB if its partial bid is successful.

VOLUNTARY RESTRICTION

However, on Monday CPPIB said it would voluntarily restrict its voting rights to 24.9 percent in a bid to calm government worries about foreign ownership of key assets.

The government's move was seen by many as politically motivated as elections are due later this year and the centre-left Labour-led coalition is trailing badly in the polls.

One analyst, who asked not to be named, said "the government doesn't give a damn about the economic ramifications, this is all about getting votes".

But the analyst said the government is likely to seriously consider the option offered by CPPIB, to save face with both voters and investors.

Either way the government faces some discomfort, the analyst said, as it had hoped to talk the offer down so shareholders rejected it. This could have boosted public support without the government having to directly take a move that could be seen as detrimental to attracting investment in New Zealand.

Although the Canadians have talked down the chance of a bid at 24.9 percent, which would not trigger the government approval threshold, the chances of such a move are probably better than 50 percent, said BT Funds equities manager Paul Richardson.

"They've said they don't need to control the asset, well, what's the difference between 24.9 percent and 40 percent for a fund that size?," he said.

CPPIB had done a lot of work to determine that Auckland Airport fitted its long-term investment goals, so would probably be determined to explore all possibilities.

"The possibility is that if they do come back it's at a lower price, reflecting global markets," Richardson said. (NZ$=$1.25) (Editing by Ian Geoghegan)