22 Dec 1998
Infrastructure & Utilities NZ Limited ("Infratil") has reached conditional agreement with Alliance Life Common Fund (L) Limited ("Alliance") and Foreign & Colonial Special Utilities Trust plc ("F&C") to purchase their shareholdings in NZ Airports Limited ("NZ Airports"). As a result, Infratil will become the sole owner of NZ Airports' 66% stake in Wellington International Airport. The agreement is conditional on the approval of Infratil's shareholders.
Earlier this year, NZ Airports acquired the Crown's 66% stake in Wellington International Airport for $96.36 million. Infratil owns 40% of NZ Airports with offshore investors Alliance and F&C owning 40% and 20% respectively. Alliance and F&C's combined 60% holding in NZ Airports is to be acquired for approximately $67M, based on a 13% premium to the original purchase price plus reimbursement of acquisition costs.
Under the terms of the proposed transaction, Infratil will fund the acquisition through the issue of an equivalent value in Convertible Equity Notes ("Notes") to Alliance and F&C. The issue price is $1.40 for each Note (being the equivalent of Infratil's Net Tangible Assets per share ("NTA") based on the market value of Infratils investments as at 21 December 1998), which compares to the current share price of $1.16 on 21 December 1998.
The Notes will have a term of 5 years, and each Note will provide holders with a detachable option to acquire one Infratil ordinary share at $1.40. The Notes will be redeemed for cash or converted into ordinary shares at 95% of market price at Infratil's option. Before redemption/conversion, the Notes will receive half yearly interest payments. The interest rate is set at 6.9% pa. The Notes do not carry any voting rights.
While Alliance and F&C had sought to take Notes as full consideration for their NZ Airports shareholding, the Infratil Directors have negotiated for all Infratil shareholders to be offered an opportunity to participate in the issue of Notes. It has been agreed that a 1:10 non-renounceable pro-rata offer for approximately one third of the total Notes would be made to shareholders. This pro-rata issue would be fully underwritten by Alliance. Infratil intends to seek separate listings for the Notes and detachable options.
Kevin O'Connor, Chairman of Infratil, said that the Directors are pleased with the opportunity to acquire full control of NZ Airports. Mr O'Connor noted "Infratil has an excellent relationship with both Alliance and F&C. F&C is a foundation shareholder in Infratil. While all three companies worked together well in both the process of bidding for Wellington International Airport and subsequent to the purchase, the new ownership will enable Infratil to take a more direct responsibility for the performance of NZ Airports. Alliance and F&C retain a substantial investment in the Airport through their increased investment in Infratil."
Mr O'Connor said that the Directors were satisfied that the purchase price of $67m offered fair value to Infratil shareholders having regard to the rise in the New Zealand sharemarket and significant falls in interest rates since the Crown's stake was acquired. Importantly, the structure provides for the issue of new Infratilequity at full NTA and thus at a 21% premium to the current shareprice. This ensures that there is no dilution of existing shareholders' interests by the issue.
Mr O'Connor noted Wellington International Airport has performed well since the acquisition became unconditional. "In the twelve months to 30 November 1998 domestic passengers have increased by 4% and international passengers by 14%. The terminal development is on target and the Company has met Infratil's expectations in terms of being a very well run company which has a strong market position and growth prospects."
Mr O'Connor noted that details of the terms of the Notes will be provided to shareholders in the new year. As this transaction is a related party transaction in terms of the NZSE Listing Rules, it is expected that shareholders will be asked to approve the transaction at an Extraordinary General Meeting to be held in late February 1999. Before this meeting, shareholders will be provided with full details of the proposed transaction and an independent appraisal report.
Convertible Equity Notes
Description Convertible Equity Note with a detachable option.
Term 5 years
Issue Date Expected to be March 1999
Voting entitlement Nil until exercise of option
Face Value of Note and exercise price of option
Coupon Rate 6.9% pa, paid semi-annually in arrears.
Coupon Payments Timed to coincide with dividend ex date. Accrued interest entitlement until date of redemption.
Redemption / Conversion At end of 5 years for cash or for shares valued at 95% of market price, at the option of Infratil.
Exercise times for options At the end of each calendar quarter.
Ranking After conversion shares will rank pari passu with ordinary shares following the next ex-dividend date. Until the next ex-dividend date the dividends will be entitled to a pro-rata share of the dividend for that period.
Option conversion ratio
and exercise price adjustment The option conversion ratio is 1:1.
Conversion ratio and exercise price are adjustable for bonus issues and bonus element of rights issues.
Listing Infratil will seek separate listings of Notes and Options.
Note Priority Ranks pari passu with unsecured creditors.
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