Sydney Airport share price: where next after new $8.45 takeover bid?

In July, Sydney Airport (ASX: SYD) rejected a consortium of infrastructure investor’s ~$22.3 billion takeover bid for the airport – arguing that it undervalued the company.

That cash takeover offer price was raised to $8.45 per share by the consortium of Monday, but not much else changed.

Indeed, despite that revised offer, Sydney’s Board yet again rejected the offer, saying it undervalued the company and that such a deal was not in the best interest of shareholders.

Sydney Airport share price

The market reacted in quite a peculiar fashion: The stock fell sharply within the first half-hour of trade, touching $7.61 per share, before quickly rebounding to trade flat into the afternoon session. Overall however, at the time of writing the stock remained sharply up from the price it traded at prior the takeover bid announcement.

This seems to strongly suggest that the market believes that the consortium of infrastructure investors will eventually raise their bid to a price amenable to Sydney Airport’s Board. Whether that plays out in reality, remains to be seen.

Nothing to see here

In rejecting that upped offer, Sydney Airport’s management reiterated many of the same lines they did the first time around. The Board again described the takeover bid as opportunistic and argued that the offer simply undervalues the company, despite the current covid-19 situation in Australia.

Indeed, with New South Wales, Victoria, and ACT now all locked down – whether a company is in the aviation sector or not – challenges remain both complex and their timelines, uncertain.

But Sydney’s Board brushed such points aside, highlighting instead the growing vaccination rates and its long-term value trajectory, as two key points of optimism for the business.

'The Boards also note the rapid increase and acceleration in Australian vaccination rates in recent weeks and the governments' plans to progressively ease restrictions as the population reaches vaccination targets which will then see the re-opening of travel.'

Beyond such macro-considerations that would likely buoy the stock, the Board also stressed the airport’s strong financial position, saying:

'Sydney Airport remains strongly positioned, has strengthened its balance sheet and tightly managed costs to maintain flexibility to respond to a range of recovery scenarios and to pursue sensible growth opportunities as the recovery unfolds.'

Looking ahead, the door remains open for potential future takeover bids. Here, Sydney Airport’s Board said:

'The Board are open to engaging with the Sydney Aviation Alliance should the Consortium be prepared to lift its indication price to appropriately recognise long term value for Sydney Airport Securityholders.'

Finally and in other news, Sydney Airport is set to release its interim results this Friday, August 20.

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