A takeover bid for Sydney Airport faces a final hurdle as Australia's competition watchdog, the Australian Competition and Consumer Commission (ACCC), reviews the sale. The review has the potential to blow up one of Australia's biggest and most lucrative infrastructure deals.
ACCC review puts US23.75 billion takeover bid in doubt
As Australia's biggest international gateway, Sydney Airport is a blue-chip long-term infrastructure asset. Normally a rich source of revenue and profits for its owners, border closures and travel restrictions have recently hit Sydney Airport hard. But the airport is soon expected to begin bouncing back strongly.
Sydney Airport is also the only airport in Australia that is publicly listed. Right now, anyone can buy shares in Sydney Airport through the Australian Stock Exchange. That gives everyday people a piece of the action. If the deal goes through, Sydney Airport will move off the stock exchange.
On Monday, the board of the Sydney Airport Corporation, owner of Sydney Airport, recommended shareholders accept the US$17.5 billion takeover bid from a consortium of superannuation funds. The new owners will also take on existing debt, raising the deal's total value to US23.75 billion.
The new owners would include pension fund investment manager IFM, Global Infrastructure Partners, and local superannuation funds QSuper and Australian Super. According to the ACCC, the problem is these funds already own sizeable stakes in other big Australian airports.
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Potential new owners already have stakes in multiple Australian airports
A Sydney Morning Herald report drills down into who owns what. IFM will take a 15% stake in Sydney Airport. But IFM already owns 25% of Melbourne Airport and 20% of Brisbane Airport. Australian Super owns 10% of Perth Airport. Via the Queensland Investment Corporation, Q Super has a stake in Brisbane Airport.
UniSuper, which already has a 15% stake in Sydney Airport and will retain that under a new corporate entity, owns 7% of Brisbane Airport and 49% of Adelaide Airport. Australia's 1996 Airports Act limits common ownership of Sydney Airport and other big Australian Airports to help prevent potential price gouging of airlines and passengers.
Graeme Samuels, a former ACCC boss who now heads an airline lobby group, told the Sydney Morning Herald the proposed deal was bad news for airlines;
"That’s just making what is a series of individual monopolies now merging into one large monopoly around Australia. It’s making it incredibly difficult for airlines to be able to negotiate fair deals.”
ACCC review due for completion by end of the year
Samuels has formally raised his concerns with the ACCC, saying the same outfits all holding big stakes in Australia's biggest airports gave the owners the upper hand when negotiating with airlines for landing rights.
Until Western Sydney Airport opens in 2026, airlines and airline passengers wanting to fly in and out of Sydney have no choice but to use Sydney Airport. Except for Melbourne, the owners of all Australia's big airports enjoy sole airport status in that city.
The ACCC has launched a formal review of the Sydney Airport takeover bid. That review should be completed by the end of the year. But the power competition watchdog has the power to scuttle the deal.
While the super funds can create new corporate entities and pull all sorts of maneuvers to get around the Airports Act, another option is selling down stakes in other Australian airports.
While all of Australia's big airports are tasty financial assets, Sydney Airport is the tastiest. Why live off feedlot chuck steak when Kobe wagyu is on the table?