Auckland Council has confirmed the sale (partial sell-down) of Auckland International Airport Limited (AIAL) shares, as signalled in its Annual Budget 2023/2024.
The sale of seven per cent of its shares, at an average share price of $8.11 per share, has returned $833 million, which will be used to reduce council debt.
Auckland Council Chief Executive Phil Wilson says this is a positive outcome for the council and for the residents and ratepayers of Tāmaki Makaurau.
“When faced with an even greater budget gap as a result of three successive years of financial challenges brought about by the pandemic, flood and cyclone recovery, and inflation and interest rate hikes, the Governing Body agreed to sell-down a portion of the council’s shareholding in AIAL.
“It set council staff firm guidance to achieve the best possible outcome, including offering the mana whenua of Tāmaki Makaurau the opportunity to participate in the sale.
“We are advised that it is the only share sale of its size in New Zealand to be sold at a premium to the market traded price, and a testament to the process initiated by the council and its advisors.
“The result is a significant return that will offset our existing debt profile and lower future interest costs,” says Mr Wilson.
Auckland Council’s remaining shareholding of 11.08 per cent provides ongoing exposure to the future growth and value of AIAL.
Deputy Mayor Desley Simpson is pleased with the outcome of the share sale.
“As we all know, the airport share sale has been a contentious issue, so it was important to give Aucklanders confidence the sale gave the benefit expected.
“The sale represents a healthy premium on the most recently traded share price. Our advisors have compared it to other transactions over $500m in Australia and New Zealand equity capital markets in the last 5-6 years. They consider this the highest ever figure achieved in terms of sale price versus closing price (30 cents or nearly 4 per cent).
“The sale now gives us debt headroom in challenging financial times to deliver more for Aucklanders. I am very pleased at the outcome," she says.
Budget decision to sell shares
Auckland Council’s Governing Body made the decision on 9 June 2023 to amend the council’s Long-term Plan to enable a partial sell-down of the council’s 18.08 per cent shareholding in AIAL. The formal adoption of the Annual Budget 2023/2024 on 29 June 2023 incorporated the AIAL sell-down with proceeds to be applied against debt retirement.
Group Chief Financial Officer Peter Gudsell says in implementing the sell-down and considering its timing, the council, with professional advice, took into consideration a range of matters to comply with the Governing Body resolution.
“A structured process to manage the sale, which balanced the council’s objectives of maximising the sale value with an appropriate timeframe, was put in place.
“We also monitored market conditions, including the timing of company, Commerce Commission and macro-economic information releases.
“Executing the sale after the release of AIAL’s latest annual results on 24 August also allowed for a fully informed market prior to the council’s sale and ensured we were engaging with the broadest pool of potential buyers.
“We have been advised that the shares were widely distributed to domestic and international wholesale investors and New Zealand retail investors via the broker network,” he says.
About the share sale
- Auckland Council was advised by Flagstaff Partners, UBS and Simpson Grierson.
- Successful completion of the sale process achieving a weighted average sale price of $8.11, realising a 3.8 per cent premium to the last NZX market traded closing price of $7.81 on 31 August 2023.
- The sale price is $833 million, net of any fees.
- Broker fees were at the low end of responses received by brokers.
