Editorial: Infratil right to dig its heels in as AustralianSuper swoops

A successful Aussie takeover of Kiwi infrastructure investor Infratil would be a huge blow to the local sharemarket and it would be sad to see the company’s renewable energy assets go offshore.

It would also highlight the success and power of Australia’s superannuation system and again provoke questions as to why our Super Fund appears reluctant to invest in domestic firms.

The takeover approach from AustralianSuper, advanced in a hostile manner this week, is far from a done deal though.

Infratil’s board politely, yet sternly, rejected the $5.37 billion non-binding offer, saying it “materially undervalues” Infratil’s high quality and unique portfolio of assets. Therefore, they weren’t prepared to engage with the suitor.

There would also be an Overseas Investment test with Infratil owning a two-thirds stake in Wellington International Airport.

Infratil’s assets also include a joint ownership of Vodafone New Zealand, 51 per cent of TrustPower, 51 per cent of Tilt Renewables (which Infratil effectively put on sale on Monday) and 48 per cent of the Canberra Data Centre, among others.

The company has delivered impressive returns to shareholders – more than 120 per cent in the past four years – and has outlined in investor presentations the potential for more upside.

One sticking point, however, is Infratil’s structure, which pays lucrative fees to manager Morrison & Co and has sparked conflict from various institutional shareholders, including state-owned ACC, over the years.

It’s this structure that AustralianSuper is looking to and drive a wedge through and has already had ACC come out and push for Infratil to negotiate with the bidder.

There are also concerns from some quarters about Infratil’s disclosure this week of an earlier offer from AustralianSuper in October and whether the market should have been informed at the time.

All this puts the acid on Infratil’s independent directors to communicate openly and remove any inkling of potential conflict between investors’ interests and those of the manager.

Meanwhile, for the NZX this is another disturbing development for its main equities bourse, despite its success in generating more vibrant debt and derivative markets.

This year, three high-profile companies have been plucked by offshore bidders – dental company Abano, retirement village specialist Metlifecare and property investor Augusta Capital.

New listings continue to be few and far between, although there are rumblings about well-known companies lining up share offers and listing in the New Year. Home meal delivery company My Food Bag is one.

The trend though, as outlined by M&A forecasters, is for take-private transactions to continue.

The widespread use of Schemes of Arrangements – such as activated by AustralianSuper – has made listed company acquisitions more likely to succeed.

And the flood of money into private equity and pension funds globally is contributing to the hunt for quality assets even in far-flung markets like New Zealand.

Losing Infratil may not be as bigger blow for the NZX than the departure of Xero, but it would be painful nonetheless.

There’s a long battle ahead as far as this takeover attempt goes but Infratil’s board should be applauded for digging their heels in so far.

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