A proposed $23.6 billion takeover of Sydney Airport has been given the green light by Australia’s competition watchdog, which said that there was “very little, if any” competition between airports.
A sale of Australia’s biggest airport to a consortium led by IFM Investors was “unlikely to substantially lessen competition in a market that already has such little competition,” said Rod Sims, chairman of the Australian Competition and Consumer Commission (ACCC.)
“Throughout our investigation, we heard that there is very little, if any, competition between Australian airports,” Mr Sims said.
“This is no surprise, as we’ve been saying for a long time that Australian airports such as Sydney Airport are natural monopolies, with significant market power and no price regulation.”
The ACCC said there was “minimal potential” for competition between airports on aeronautical services, such as when an international airline tries to secure landing slots in Australia or when airports are located close to one another.
But it concluded that any lessening of competition following the proposed takeover would not be substantial.
Sydney Airport’s shares jumped 23¢, or 2.7 per cent, to trade at $8.58 on Thursday morning on the ASX, their highest level since January 2020.
The watchdog examined whether the cross-ownership holdings of some consortium members would lead to information being shared that could enable some airports to secure more favourable terms from their users, but did not raise any objections.
IFM and New York-based Global Infrastructure Partners would be Sydney Airport’s two biggest owners if the takeover bid succeeds.
IFM’s Australian Infrastructure Fund and its Cayman Islands-based Global Infrastructure Fund will each hold up to 18 per cent, while New York-headquartered Global Infrastructure Partners will own more than 20 per cent.
The investment groups have not provided exact details of their proposed ownership stakes, which would lead to a large chunk of the airport being held in overseas funds. By law, at least 51 per cent of the airport must be held in Australia.
The proposed takeover has also been approved by the European Union’s merger regulators but still requires approval from the Foreign Investment Review Board.
IFM already owns 20 per cent of Brisbane Airport and 25 per cent of Melbourne Airport, while QSuper holds a stake (it has not disclosed the size) in Brisbane Airport through the Queensland Investment Corporation.
AustralianSuper, which is one of IFM’s member funds, holds a 5 per cent direct stake in Perth Airport in addition to an indirect stake of 4.75 per cent through an investment with Hastings Funds Management.
The competition watchdog has been pushing for tougher regulation of airports to stop them excessively raising fees charged to airlines and other airport users such as car hire and taxi companies, and said it would continue to advocate for a more “effective” regulatory regime.
“The ACCC maintains the view that the threat of regulation under the current limited monitoring regime does not constrain the pricing behaviour of our airports,” Mr Sims said.
“The absence of constraint ultimately leads to consumers paying higher airport passenger charges than they otherwise would.”
Sydney Airport’s board has recommended investors accept the takeover offer of $8.75 per share in cash. But some shareholders believe the airport is worth more.
The company told investors in a letter this week that a vote on the takeover is expected to be held in early February. A scheme booklet and independent expert’s report is likely to be sent out in late December.
The takeover, which is occurring via a scheme of arrangement, will only succeed if it is approved by at least 75 per cent of all votes cast, and more than 50 per cent by number of investors who turn out to vote.
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