A consortium of investors led by industry super fund-owned IFM Investors has put in a takeover bid for Sydney Airport worth $22.3 billion.
The bid, made as the airport still reels from the COVID-induced collapse in passenger numbers, is pitched at $8.25 per share.
If successful, it will see Sydney Airport taken off the sharemarket and become almost totally owned by industry super funds, with a small stake given to US private equity group Global Infrastructure Partners (GIP).
Principal economist with Lateral Economics, Nicholas Gruen, said moves like this “are a logical thing for industry super to be doing as being unlisted gives you some advantages as the sector demonstrates again and again”.
“It’s cost advantages among other things,” Mr Gruen said.
It’s cheaper with not-for-profits
Those cost advantages come from not having to pay out profits to commercial owners because industry funds return all profits to members.
IFM Investors is owned by 26 industry super funds and has $155 billion in funds under management. It has been joined in the bidding consortium by GIP and Queensland-based industry fund QSuper.
As part of its aim of keeping as much of Sydney Airport in the hands of super fund members as possible, IFM has made its bid conditional on UniSuper, the largest current shareholder with 15 per cent, remaining an investor and reinvesting its shares.
The rest of Sydney Airport is currently owned by private investors including listed investment groups AFIC and Argo.
It was sold by the federal government in 2002 for $4.23 billion to Macquarie Group, which later on-sold it.
Sydney Airport management has told investors to sit on their hands while it considers the bid.
“The indicative price is below where Sydney Airport’s security price traded before the pandemic,” the airport’s board said in a statement.
But while the bidders have made their offer while passenger numbers remain low due to COVID restrictions, it is pitched at 43 per cent above the sharemarket price on July 1.
And it is also higher than the price of $9.10 reached before the crash when the share price effects of a $2 billion equity raising last August is factored in.
Where the money is going
The move highlights the increasing move to not-for-profit fund ownership for mature infrastructure assets.
Back in 2018, NSW privatised its Ausgrid electricity network for what was then a record $16.2 billion paid by AustralianSuper and IFM.
Mr Gruen said the move away from private shareholdings in mature infrastructure is “very striking given what we’re told about capitalism”.
“The things that capitalism seems to do best is making things and doing things that don’t have too many layers of reporting,” he said.
With complex arrangements like putting together and owning infrastructure assets in private ownership “you build this whole structure around a set of tasks where people are actually clipping the ticket,” Mr Gruen said.
“[But] in the not-for-profit structure it’s simpler and it’s obviously less susceptible to opportunistic profit-taking by an absolute blizzard of people”.
The end result of not-for-profit capital owning more infrastructure projects would be a capital market that “is more reality based,” Mr Gruen added.
“It’s trying harder because it is trying to get better returns for the people who own the capital [fund members],” he said.
Marion Terrill, transport and cities program manager with the Grattan Institute, said “there would be a lot of money chasing assets like this”.
“It’s a heavily regulated asset, which makes it different to businesses that are facing less government scrutiny,” Ms Terrill said.
That structure would make it more attractive to profit-to-member capital which wouldn’t need to draw on profits at so many points through the management process, she said.
In a statement, the bidders said: “The members of the consortium are highly experienced infrastructure owners, who invest directly or indirectly on behalf of more than six million Australian superannuation fund members, and collectively have in excess of $177 billion of infrastructure funds under management globally, including interests in 20 airports that collectively served more than 330 million passengers in 2019”.
The New Daily is owned by Industry Super Holdings