Sydney Airport share price: where next as Board rejects $22bn takeover bid?

Sydney Airport's Board on Thursday updated the market in relation to the recent takeover bid for the company.

For reference, that takeover offer – made by consortium of infrastructure investors in early July – was for $8.25 per share, valuing the airport at around $22 billion.

Since then, the market has been carefully waiting for a response from Sydney’s Board.

And after carefully considering the offer, the Board on Thursday said it had unanimously concluded that the offer both undervalues the company and that it was not in the best interest of shareholders. As a result, the Board said it would be rejecting the offer from the consortium.

No surprises here

Looking over Sydney’s initial response to the takeover bid, this decision is not the most surprising one.

When the offer was first made, we wrote that the airport's management team struck a somewhat sceptical tone in relation to the offer, at the time stressing that Sydney Airport is a 'world class airport and one of Australia's most important infrastructure assets.' It was also pointed out that the offer price of $8.25 per security is below where the stock traded at on a pre-pandemic basis.

The market seems to have been equally unsurprised by the reveal that the company would not be accepting the takeover offer. The stock did not crash, rather is slipped just 1.6% at the open. By 11 am, the stock was in the green!

Is the market anticipating that the consortium of infrastructure investors will up their offer? Only time will tell.

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Why reject the offer?

The Board spun off a number of reasons why it would not be accepting the consortium’s offer, with some of the most prominent reasons including:

• Reiterating that the takeover offer was opportunistic in nature, as it sits below where the stock traded at prior to the pandemic
• Noting that as a listed entity the company has historically delivered strong value to shareholders
• Highlighting that there remains potential value creation opportunities 'through further development of on-airport commercial property’
• And stressing that the company is well-placed to benefit from the easing of global restrictions once greater levels of vaccination had been achieved

Despite highlighting those reasons to reject the consortium’s offer in its current form, the door was not shut completely on potentially accepting a future, higher takeover bid.

'The Boards recognise that the security price is likely to trade below the Consortium proposal's indicative price in the short term, however Sydney Airport will only progress a change in control transaction on terms that deliver and recognise long-term value' for shareholders.

The Board said it remains squarely focused on maximising long-term value for shareholders.