Confirmation of approach to Sydney airport

IFM Investors

The Sydney Aviation Alliance, an Australian-led consortium consisting of the IFM Australian Infrastructure Fund, the IFM Global Infrastructure Fund, QSuper and Global Infrastructure Partners (collectively, the “Consortium”), confirms that on Friday, 2 July 2021 it approached the Board of Sydney Airport Limited with a non-binding indicative proposal to acquire all of the stapled securities in Sydney Airport Limited and Sydney Airport Trust 1 (together “Sydney Airport” or the “Company”) by way of a Scheme of Arrangement and a Trust Scheme (the “Proposal”).

The members of the Consortium are highly experienced infrastructure owners, who invest directly or indirectly on behalf of more than six million Australian superannuation fund members, and collectively have in excess of A$177 billion of infrastructure funds under management globally including interests in 20 airports that collectively served more than 330 million passengers in 2019.

The Proposal ensures substantial ongoing Australian ownership of this nationally significant infrastructure asset, with the Consortium having a proven track record of investing billions of dollars in airports and other significant infrastructure assets, helping create Australian jobs while enhancing passenger and customer experiences. Australian airports in which Consortium members have ownership interests have invested more than A$3.8 billion in capital programs over the last five years, including the construction of a second runway at Brisbane Airport and terminal improvements at Melbourne Airport. These Australian airports have also provided more than A$300 million in rent relief to retail and property tenants due to the impact of COVID-19.

The Consortium believes that the Proposal, if implemented, would deliver significant value and economic certainty to Sydney Airport securityholders and is in the long-term interest of Sydney and the travelling public.

The Proposal comprises cash consideration of A$8.25 per Sydney Airport stapled security.[1] This represents a substantial premium to recent and medium-term market prices as well as the price for Sydney Airport’s A$2 billion equity raise in August 2020 when it issued 19.4% of its issued capital at A$4.56 per stapled security, specifically:

· 43% premium to Sydney Airport’s closing price on 1 July 2021;

· 38% premium to Sydney Airport’s 1 month VWAP on 1 July 2021;

· 38% premium to Sydney Airport’s 3 month VWAP on 1 July 2021;

· 38% premium to Sydney Airport’s 6 month VWAP on 1 July 2021; and

· 81% premium to the offer price of Sydney Airport’s A$2 billion equity raise in August 2020.

The Proposal implies an equity value for Sydney Airport of A$22.3 billion and an enterprise value of A$29.8 billion.

The Proposal is conditional on Sydney Airport’s largest securityholder, UniSuper, agreeing to reinvest its holding into an equivalent unlisted and illiquid interest in the privatised Sydney Airport. This will serve to maximise the participation of Australian superannuation funds in the ongoing ownership of Sydney Airport.

The Proposal is also conditional on, among other things, a targeted due diligence review and entry into a satisfactory scheme implementation deed. Completion of any transaction would be subject to, among other conditions, certain regulatory approvals, including Foreign Investment Review Board approval and Australian Competition and Consumer Commission approval.

The Sydney Aviation Alliance comprises a distinct combination of leading Australian and global airport infrastructure expertise and financial capability, which provides a stable, deep and certain funding base for the development of the airport and broader precinct over the long term.

The Consortium is not anticipating making substantive changes to management, services, operations or target credit ratings of Sydney Airport and acknowledges the legally binding nature of Sydney Airport’s current regulatory operating restrictions (regional slots, curfews and aircraft movement caps) and the importance of these to the broader community. The Consortium is also highly supportive of, and organisationally aligned to, Sydney Airport’s commitment to net zero carbon emissions by 2030.

The Consortium understands the requirement for Sydney Airport to undertake a detailed assessment of the Proposal. There is no assurance that the Proposal, or any other transaction, will be agreed or will proceed.

/Public Release. This material comes from the originating organization/author(s)and may be of a point-in-time nature, edited for clarity, style and length. The views and opinions expressed are those of the author(s).