UPDATE 2-Canada fund wins NZ airport bid, awaits government

(Adds comments, share price)

By Adrian Bathgate

WELLINGTON, March 14 (Reuters) - A Canadian pension fund won shareholder approval for a $1.5 billion bid for 40 percent of New Zealand's Auckland International Airport Ltd (AIA.NZ), but still faces the tougher hurdle of getting government clearance.

The New Zealand government had moved to curb the bid for the airport, which handles 70 percent of the country's international air traffic, on concerns over foreign control of strategic assets.

In response, the Canadian Pension Plan Investment Board (CPPIB) offered to reduce its voting rights in the airport, a move that analysts said made it difficult to try to predict the government's final decision.

"It's a hard one to call, still 50/50 at this stage," said Tower equities analyst Manher Sukha.

"It's not a numbers decision, its more political, and what they see as potentially a strategic asset being moved to offshore control."

Shares in Auckland Airport were down 6.7 percent at NZ$2.37, in a broader market down almost 1 percent .NZ50.

Following takeover interest last year, the airport said it would seek a cornerstone minority shareholder with airports experience to help grow the company's earnings.

Last September, state-backed Dubai Aerospace Enterprise withdrew a bid for a stake of up to 60 percent equal to NZ$3.80 a share, saying the board had not done enough to promote the deal.

A spokeswoman for the Overseas Investment Office said the CPPIB application had been received, and a final recommendation would be made to the government.

The final decision will be made by two government ministers, Associate Finance Minister Clayton Cosgrove and Land Information Minister David Parker. The deal needs to secure approval by April 11 to avoid lapsing.

CALMING MOVE

The CPPIB said earlier in the week it would reduce its voting rights to 24.9 percent, the threshold for overseas ownership, from a previous 30 percent, to ease government concerns about foreign control.

Some analysts said that may convince authorities.

"Given the government has achieved what it was looking for, which is limiting overseas influence on Auckland Airport, it could be enough," said Macquarie investment director Arthur Lim.

CPPIB said it had a total holding of 63.25 percent for its partial offer at NZ$3.5980 a share by its deadline, which would be scaled back to 40 percent level on a pro-rata basis. The offer was approved by nearly 58 percent of voting shareholders as required by New Zealand takeover rules.

The result surprised CPPIB, which had expected to get 45-50 percent of shares, vice president Graeme Bevans said.

"The shareholders clearly have spoken, particularly in relation to the vote with 57 percent in favour, and it's a compelling outcome," Bevans told Reuters.

The airport's two biggest shareholders, the Auckland and Manukau city councils, which have around 23 percent, both retained their stakes and voted against the bid.

The next largest shareholder, the New Zealand state pension fund with just over 6 percent, accepted the offer.

Bevans said retail shareholders were the biggest surprise, with acceptances much higher than expected, probably due to the differential between the market price and the offer price.

Auckland Airport chairman Tony Frankham called on the government to announce its decision as soon as possible, in the interests of certainty and an informed market. (NZ$1=$1.22) (Editing by Jonathan Standing)