Sydney Airport Holdings (ASX: SYD) has entered into a Scheme Implementation Deed with consortium Sydney Aviation Alliance (SAA) to take Australia’s only publicly listed airport private.
SAA is a combination of various investment managers including IFM Australia, IFM Global, AustralianSuper, QSuper and Global Infrastructure Partners.
A Scheme Implementation Deed, or SID, is an agreement by the bidder and target that sets out key conditions for the bidder to acquire all of the target’s shares.
What was announced?
SAA will acquire 100% of the shares in Sydney Airport for $8.75 per stapled security.
Current substantial shareholder UniSuper will transfer its 15.01% holding to an equivalent interest under SAA.
All board members will recommend and vote in favour of the offer, subject to an independent report and the absence of a superior proposal.
Additionally, the takeover remains subject to shareholder, regulatory and court approval.
Shareholders of Sydney Airport will be able to vote on the offer in the first three months of 2022.
Third time lucky
It’s been a lengthy to and fro between Sydney Airport and SAA.
The original $8.25 per stapled security offer on July 5 was sent packing by the Sydney Airport board.
A subsequent $8.45 per stapled security on August 16 was also turned away.
However, Sydney Airport couldn’t go past the $8.75 per stapled security on September 13. After granting due diligence, both parties have entered into a SID.
The deal values the equity component of Sydney Airport at $23.6 billion. Including debt, the deal is worth over $32 billion.
Notably, the agreed offer is a $1.3 billion uplift from the original $8.25 proposal offered by SAA.
The Sydney Airport share price is trading 45% higher from its undisturbed price back in July.
Exquisite timing
It’s commonly agreed in investing that timing the market is a waste of time.
SAA would likely disagree.
The consortium has bought arguably Australia’s best infrastructure asset at a time when airline traffic has been at its all-time lows.
September traffic was down 81.2% compared to the same month in 2019. Staggeringly, international traffic where Sydney Airport earns its best profits is down 96.8%.
Call it good luck, but with domestic and international border restrictions falling each week, SAA will get an immediate uplift.
It will be interesting to see how shareholders view the deal next year after travel returns to a more normal level and its prized asset is spinning off profits after a two-year downturn.
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