If successful, it would be the biggest such deal in Australia this year, eclipsing the $8.1 billion spin-off of Endeavour Group Ltd and Star Entertainment Group Ltd’s $7.3 billion bid for Crown Resorts Ltd.
A consortium comprised of IFM Investors, pension fund QSuper and Global Infrastructure Partners - called the Sydney Aviation Alliance - has offered A$8.25 per Sydney Airport share, a 42% premium to the stock’s closing price on Friday.
Its shares were trading at as much as A$8.04 on Monday morning, though they later fell back to around A$7.68.
Sydney Airport noted the offer is below its pre-pandemic share price and said it was reviewing the proposal, which is contingent on allowing access to due diligence and recommending it to shareholders in the absence of a superior offer.
The airport operator’s share price hit a record high of A$8.86 in January last year, before the pandemic led to a collapse in travel demand.
The company is Australia’s only listed airport operator. A successful deal would bring its ownership in line with the country’s other major airports which are owned by consortia of infrastructure investors - primarily pension funds - with long-term investment horizons.
Australia’s mandatory retirement savings system, known as superannuation, has assets of A$3.1 trillion, according to the Association of Superannuation Funds of Australia.
With interest rates at record lows, funds are looking at infrastructure investments for higher yields.
The offer comes at a time when Australia’s international borders are widely expected to remain closed until at least the end of the year due partly to a slower novel coronavirus vaccination programme than in most developed countries.
Domestic travel has also been severely disrupted by a two-week lockdown in Sydney during the normally busy school holiday period, after an outbreak of the highly contagious Delta variant of COVID-19. Other states have closed borders to Sydney residents.
In May, Sydney Airport’s international traffic was down more than 93% versus the same month of 2019, while domestic traffic was down 39.2%.
The airport has long held a monopoly on traffic to and from Australia’s most populous city, but that is due to end in 2026 with the opening of Western Sydney Airport.
Sydney Aviation Alliance said it did not anticipate making substantive changes to the airport’s management, services, operations or target credit ratings.
The consortium said its members invest directly or indirectly on behalf of more than 6 million Australians and collectively have more than A$177 billion of infrastructure funds under management globally, including stakes in 20 airports.
IFM holds stakes in major Australian airports in Melbourne, Brisbane, Perth and Adelaide. QSuper owns a stake in London’s Heathrow Airport and Global Infrastructure is invested in London’s Gatwick and City airports.
Their offer is contingent on UniSuper, the airport’s largest shareholder with a 15% stake, agreeing to reinvest its equity interest for an equivalent equity holding in the consortium’s vehicle.
“This will serve to maximise the participation of Australian superannuation funds in the ongoing ownership of Sydney Airport,” Sydney Aviation Alliance said.
UniSuper, which also holds stakes in Adelaide and Brisbane airports, did not respond to a request for comment.
Sydney Airport said it had hired Barrenjoey and UBS as financial advisers.
Shares in New Zealand’s Auckland International Airport Ltd, the only other listed airport operator in Australasia, were trading nearly 6% higher on Monday morning.