Auckland Airport - rating the players

Well, it's now in the hands of the Overseas Investment Office and the politicians.

After painful months of bid, rejection, counter-bid and apparent knee-jerk response from local councils and national politicians, the private and institutional shareholders have voted heavily in favour of selling their Auckland Airport shares. But we now have to wait, possibly until mid-April, to see if normal property rights - such as the right to sell a share in a public company to a willing buyer - will prevail over a vague (and lately introduced) concept known as 'the national interest'.

Report Card:

The institutions and small shareholders: Pass: they have behaved rationally, opting to sell their shares for a price far above the current market. Yes, the bloodbath in capital and equity markets over the last few months (hey, cash looks good right now) has encouraged them; but they've probably been prompted even more by the government's recent intervention in the process, in announcing, at very much the last moment, that the bid will be subject to Ministerial decree about selling 'sensitive assets on sensitive land'. No forewarning of this goalpost-shift, by the way! Ironically, without this last minute move, it seems quite possible that many shareholders would have opted not to sell. But when you're told that you don't know what's best for you, you tend to react.

The board of AIA: A pass, but must do better next time: I think people have been confused by the board's position. It has sent messages that the company needs a cornerstone shareholder, but then advised against the bid to begin with. With the recent change in sharemarket conditions, the board changed its advice - recommending against approving the bid, but advising holders to sell if it proceeded. If you realise the directors' first duty (under the Companies Act) is to the Company - not the shareholders - I think you can make more sense of this: perhaps directors feel the Canadians aren't the best option for the company, but wanted to help the smaller shareholders to make a sensible decision if the bid does go ahead. But they could have been clearer and explained their thinking a little better

Auckland and Manukau City Councils: They've sat this test twice (Dubai Airports last year) and failed both times. Well, they're politicians, so it's hard to expect fully rational, strategic thinking. Never mind their decision over this bid: mightn't things be quite different if they had embraced the original bid from Dubai Airports? Auckland could have looked forward to becoming a major hub for one of the world's biggest airlines; someone, other than the ratepayers of Auckland and Manukau, would have invested a lot of money in improving the airport, creating countless jobs and further wealth for the region (... and obviously increasing New Zealand's relevance as a global transit stop - a new Singapore, or of course Dubai, model). Perhaps most important, and something that seems to have been forgotten, the two City Councils would have had the sale proceeds available to invest elsewhere ... possibly some of it back into the airport if it had remained a listed company, almost certainly at a lower price once the premium for control had gone! (Poor ratepayers, yet again.)

The bidder, CPPIB: Well done, a good pass. I think it's hard to find fault with their behaviour throughout. I hope to see them back here next term. They've made a good, clean offer and have said they don't want control of the board. If you look at their history, they're not asset-strippers, but tend to be long-term holders, looking for long-term returns (and isn't that what we all really want from Auckland Airport?). Now they've even said they're willing to reduce their voting rights to 25%, even though they may own 40% of the company. And they've done this in spite of all our attempts to kick sand in their faces. A pity that some other people in the playground haven't behaved as rationally and honourably.

Finally, will someone please explain to me this xenophobia about selling 'infrastructure' assets to overseas owners? Of all the things you can sell, infrastructure seem the lowest risk of all under overseas ownership: after all, if things go really sour, they can't actually take Auckland airport away, or close it down and shift it to China. Compare that with many other types of business that we seem less reluctant to sell! Oh, and did I mention that those who sell would actually have cash to re-invest in something else: it's not as if the airport's being stolen.

Overseas, this isn't such a big deal - after all the Spanish own Heathrow Airport (did you even know that ... or care?).

Please don't let this become yet another case of New Zealand snatching a last minute defeat - and of helping overseas investors understand that we're really not the good and stable investment destination you thought we were.

(Disclosure: A family member of mine has a small, non-lifestyle-changing, shareholding in AIA, and has voted both to approve the Canadian bid proceeding and to accept the offer for the shares ... we'll wait and see.)

Update on Carl Icahn's blogging

You may remember in my post 'An idea whose time has come?' I noted that iconoclast Carl Icahn was launching his own blog on corporate governance.

If you're wondering why it hasn't yet hit the headlines, here's the latest from Reuters:

"... So far, however, readers wanting a fix of the latest Icahn blast on The Icahn Report have been disappointed, with the site simply sporting a dour picture of Icahn with the notation, 'blog coming soon'. At a meeting last night, Icahn explained that he’s not suffering from writers’ block, but said his lawyers are stopping him. 'Every night, I write for an hour and they tear it up,' said Icahn with a sardonic laugh."

Isn't it good to live in a less litigious environment, where we don't typically ask our lawyers to clear every step ... unless you're a lawyer I suppose.

"Interesting times" in health

Working with a couple of New Zealand District Health Boards this week, I was reminded of the (perhaps allegorical) Chinese curse, "May you live in interesting times." Although perhaps cliched, it seemed a reasonable opening for my presentation to board members in one of the largest, most complex and highest profile sectors in the economy. (I also questioned what some of them must have done to have deserved the curse in the first place.)

I looked into the origins of the saying: it has been quoted in English since about the 1940s, but what I found most interesting was the story that this is only the lowest of three curses of increasing severity, with the others being:

• "May you come to the attention of those in authority" - a curse that was obviously laid on the entire Board of the Hawkes Bay DHB, who were very publicy sacked last week; and, worst of all,
• "May you find what you are looking for" - perhaps you can think of your own candidate/victim, but I wonder if the new Minister of Health might have have hesitated before his notorious "I'm running the show" comment, if he'd been aware of this 'ultimate' curse.