The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price has risen 5% to $8.41 this morning after a third acquisition offer from Sydney Aviation Alliance.
The revised offer values shares at $8.75 per share, an increase from the $8.45 offered four weeks ago.
Third time lucky?
The third offer from IFM Investors, QSuper and Global Infrastructure Management – known as Sydney Aviation Alliance, values the company at $32 billion.
Initially, the consortium offered $8.25 per share, which was quickly rejected by the Sydney Airport board. Management sighted that it undervalued the monopoly asset and would not be in the best interest of shareholders.
A month later, Sydney Aviation upped its offer to $8.45, however again was sent packing by the Sydney Airport board.
This time the consortium came to the table with an $8.75 per share offer.
Positively, the Sydney Airport board has been more receptive to the third offer. Sydney Aviation has been granted access to the business’s books for non-exclusive due diligence.
Subject to final terms and an independent report endorsing the proposal, the Sydney Airport board will unanimously recommend shareholders accept the $8.75 per share offer.
How has the Sydney Airport share price reacted?
The Sydney Airport share price has reacted positively to the news, sending shares up to $8.41 this morning.
Often when a takeover offer is announced, the company will trade below that price until the deal is finalised.
In this case, the offer by Sydney Aviation is still non-binding, meaning they can walk away from the deal at any time. Furthermore, the offer will still need to be approved by regulators and voted on by shareholders.
As a result, the share price will likely lag the $8.75 per share offer for the time being.
What does this mean for shareholders?
Sydney Aviation and Sydney Airport will enter a non-disclosure agreement (NDA) before due diligence is allowed.
Once the NDA is signed, it is expected it will take four weeks for the alliance to complete its check on the business’s books.
Pending no major red flags, then a binding offer should be announced.
At this stage, shareholders do not need to take any action. Expect to hear an update in about a months time.
If you’re looking to replace the steady cash flows and dividends from Sydney Airport, I’d recommend checking out Deterra Royalties Ltd (ASX: DRR).
It currently has a 6.3% gross yield and provides low-risk exposure to the mining sector.
