Local Strife, Falling Profits Make Buyout Less Attractive
Citing a legal
technicality in its merger agreement signed in July with leaders of
Auckland International Airport, this week Dubai Aerospace
Enterprise took its first steps towards backing out of its $1.8
billion offer to take over New Zealand's busiest airport.
Forbes reports Dubai Aerospace alerted the airport Thursday to
an apparent breach in the contract agreement, due to Air New
Zealand's recent request for a judicial review of new landing
charges imposed on airlines flying from Auckland, and Wellington
The Dubai fund claims that inquiry amounts to a "prescribed
occurrence" that breaches the terms of the original plan. The
state-backed group also took Auckland Airport leaders to task for
allegedly not doing all they could to ensure a successful outcome
to the proposed merger.
Though Dubai likely has a valid point in terms of legality, many
feel the ownership group is grasping onto the landing fee fight as
a graceful way to pull out of the proposed offer to buy the
airport, after the plan received substantial criticism from national politicians and
As ANN reported, Dubai
Aerospace needs 75 percent approval from shareholders in Auckland
International for the deal to pass muster. However, two local
government entities that own a combined 23 percent in the airport
haven't thrown their support to the plan... hinting they may
actually try to block the deal.
Infratil, a utilities investor, and the New Zealand-owned
Superannuation Fund, together own 6.2 percent of the Auckland
airport. Combine this with the 23 percent stake cited above, and it
may be enough to prevent Dubai Aerospace from gaining enough
support for the bid.
Also not helping
matters for Dubai Aerospace is local opposition to the plan. Recent
polls show 80 percent of Auckland residents opposed the deal,
according to the New Zealand Herald.
Of course, local politics may have little to do with it.
Auckland's profitability has fallen 11 percent in 2007, with annual
net earnings of $65 million... one reason why the airport is asking
carriers to pay more to use the airport. In the face of airline
opposition, though, it may appear to Dubai the airport isn't likely
to pose a return on its investment in the near future.