NZ's Auckland Airport rejects takeover offer

WELLINGTON (Reuters) - Auckland International Airport (AIA.NZ), operator of New Zealand's main international gateway, rejected a Canadian fund's NZ$1.8 billion ($1.4 billion) offer for up to a 40 percent stake, saying it was too low, would raise debt levels and the fund lacked expertise in running airports.

The board's view echoes that of many analysts and minority shareholders, with the Canada Pension Plan Investment Board's (CPPIB) bid being widely tipped to fail.

"Unless there was something more compelling in there, you'd think the deal would struggle if the board's not going to support it," said Paul Richardson, equity manager at BT Funds.

Shares in Auckland Airport, the ninth-biggest company on the local stock market, fell 1.8 percent to NZ$2.75 on Monday in a broader market .NZ50 down 0.8 percent.

The CPPIB formally opened its bid for up to 40 percent of the airport operator on Friday, saying its offer of NZ$3.6555 a share was at the "very high end of comparable international airport valuations" and at a hefty premium to recent trading.

The fund has proposed a capital restructuring if the bid succeeds, which would see shareholders given a mix of shares and convertible notes in a new company.

Despite an independent adviser estimating the company's value at NZ$3.08 to NZ$3.47 a share, Auckland Airport Chairman Tony Frankham said the board unanimously agreed the offer did not reflect the full value of the airport.

"SERIOUS DOUBTS"

"The board has serious doubts about whether the amalgamation proposal outlined by the Canadians can succeed and was previously concerned by the high debt levels of that proposal," Frankham said in a statement.

If the bid fails, Frankham said the airport would continue to seek a cornerstone shareholder with aviation expertise to help grow the business.

"By accepting this partial offer shareholders will have lost any future opportunity to benefit from the introduction of an industry partner," Frankham said.

BT's Richardson said the fact some existing shareholders would only want to see a cornerstone shareholder take a stake of less than 30 percent may deter some larger airport companies.

Auckland Airport handles more than 70 percent of New Zealand's international traffic.

Shareholder discontent at the way the company has handled prospective takeovers led to the resignation of the chairman and three new board members appointed at last month's annual meeting.

In 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.

The airport's sale is politically sensitive, with opponents arguing it would lead to foreign control of a strategic asset.

About 23 percent of Auckland Airport's shares are owned by two local city councils. The two, along with other key shareholders, New Zealand's state pension fund and utilities investor Infratil (IFT.NZ), have indicated they are not keen to sell.

($1=NZ$1.31)

(Additional reporting by Adrian Bathgate; Editing by Ian Geoghegan)