Sydney Airport (ASX:SYD) share price on watch after takeover bid rejected

The board says the offer is opportunistic and undervalues the company.

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rubber stamp stamping 'rejected' on paper.

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The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price will be in focus when trading resumes this morning. That’s because the company has formally rejected the takeover offer for 100% of its shares.

Shares in Australia’s largest airport ended yesterday’s session 0.51% lower at $7.80 after speculation emerged the board would reject the indicative offer.

Let’s take a closer look at today’s news.

Board says no

In a statement to the ASX, Sydney Airport advised it has turned down the offer from a consortium of infrastructure investors to buy 100% of its shares at $8.25 apiece.

The board says the offer “undervalues Sydney Airport and is not in the best interests of Securityholders.”

It gave the following reasons for rejecting the offer:

  • The “irreplaceable nature” of Sydney Airport.
  • Sydney Airport is a capitalised asset.
  • The board believes the offer is “opportunistic” and is taking advantage of the COVID-19 pandemic. The offer is below the Sydney Airport share price pre-pandemic.
  • The diversity of its revenue sources and “significant value” of the airport’s land assets.
  • Anticipated stronger growth in a vaccinated, post-COVID world.

In its statement, the board says it “recognise(s)… the security price is likely to trade below the Consortium proposal’s indicative price in the short term…”

The original offer

When the bid by the consortium was submitted, the Sydney Airport share price rocketed almost 40% on the day.

The bid of $8.25 per share represented a premium of 42% to the closing price on the Friday before the submission. The bid included absorbing the $10 billion in debt held by Sydney Airport – making the total bid around $30 billion.

Sydney Airport share price snapshot

Over the past 12 months, the Sydney Airport share price has increased 46.5%.

While this has been driven mostly by the takeover bid, it has not been the only contributing factor. On the last trading day before the offer was sent, the company’s share price was already higher than when compared to one year prior.

Sydney Airport’s market capitalisation is approximately $21 billion.

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