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Auckland City Council has decided to sell half of its stake in the Auckland International Airport (AIA).
The sale at $4.90 a share will net the council $190.8 million.
The decision to sell came after a debate on Thursday evening on whether all or any of the council's 25.6% share in the airport company should be sold.
Mayor John Banks said the council could have sold all of its shares but the city's debt position has improved so it did not need to do so.
He said at $4.90 a share the placement discount for the sale of the shares was 5% compared with Wednesday's closing price for AIA stock. That is a good deal, he said.
Councillors voted 11 to 8 in favour of the partial sale.
Banks, at a briefing to announce the deal, took a pop shot at sale opponents saying they had cost the city at least $20 million in proceeds from the sale. It had not been a fire sale as suggested, but came after an extensive, international auction.
The deal had taken until 6am on Friday to complete after the negotiating team leveraged the price per share up from $4.85 to $4.90 a share, netting an extra $2 million. Banks said that would go someway towards paying the costs of the sale (such as legal and brokerage) of $5.7 million.
The buyers were from 55 institutional investors, with 25% of those investors from New Zealand and the remainder from Australia, Europe and the US.
Trading in AIA's shares was suspended while the council made its decision, with the stock at that point at $5.16 a share.
After trading resumed the shares increased, by 11 cents mid-morning, to $5.27 a share, but on volume less just over 361,000.
In a second part of the deal, brokered through NZ First Capital and Credit Suisse First Boston, the council has signed a contract that it will not sell its other 12.8% of AIA for at least two years, unless it is to a trade buyer who agrees to abide by the two year period, or through a takeover bid.
Banks said the contract was put in place to stop uncertainty about the council's intentions and any possible impact of that uncertainty on the share price.
The council has signalled it will use the sale proceeds pay back debt. It will be invested in a sinking fund, which will be used to pay back long term bonds as they become due over the next three years.
Mayor John Banks says the sale proceeds will allow the council to avoid a $242 million debt peak in three years' time.
He says avoiding that debt will also avoid the need to increase rates by 1.5 to 2%.
Banks says the council will be debt free by 2005 after adding in a $54 million capital repayment it has received from AIA and $83 million it is about to receive from government for the sale of its pensioner housing, to the debt reduction plan.
Councillor Doug Armstrong said the sale decision was a pragmatic one. While some might describe it as selling the family silver, there are other parts of the family silver that need assistance.
He says the dividends the council was receiving from AIA didn't cover the 7% cost of borrowing to build the Britomart.
SOURCE: nzoom
