Global demand for port saleSave
By Anne Gibson
International investors want a slice of the valuable, highly desirable $1.1 billion Ports of Auckland, city financiers say.
Chris Gaskin of Devon Funds said any float of the lucrative Auckland Council-owned business would be popular with "a mix of retail investors, local institutions, Australians and other international investors".
The Herald has reported how an initial public offering (IPO) is being discussed in merchant banking circles, selling the operating company or part of the entire entity and Auckland Mayor Phil Goff says he has had wide-ranging discussions but no specific proposal.
Shane Solly of Harbour Asset Management said other industry players, businesses from Australia and global operators from the likes of Asia would be extremely keen.
"But we, as domestic investors, would be keen," Solly said "and that's a question for the potential vendors, whether they favour a domestic ownership model."
Brian Gaynor, an executive director Milford Asset Management said New Zealand had a huge shortage of investment opportunities.
"The company listed in October 1993 after an IPO at $1.60 a share. It delisted in July 2005 after a takeover offer of $8 a share. Waikato Regional Council sold its shares through the IPO, Auckland continued to own about 80 per cent of the company when it was listed.
"Shareholders did very well through share price appreciation, high dividend payments and capital repayments. The demand for shares would be strong but it would depend on price as the company delivered for shareholders in the 1993-2005 period.
"Not much talk about an IPO because these are never certain as far as publically owned assets are concerned. Political processes can take a long, long time," Gaynor said.
Mark Lister of Craigs said there was global demand for quality businesses "making the current environment an opportune time for potential vendors to consider selling or partially selling assets.
"Infrastructure assets in particular have appeal for New Zealand investors, both private investors as well as KiwiSaver funds, because of their defensiveness, strong cash flows, and predictability of earnings," Lister said.
But buyers would want the land with the business "although every opportunity is judged on its merits and a good business with attractive growth prospects is still something investors would be interested in."
The Port of Tauranga is listed on the NZX with the Bay of Plenty Regional Council retaining 54.1 per cent, Lister noted.
Its operational and financial performance was streaks ahead of the rest, he said.
"This has been a win-win all round, with the company delivering very strong gains to its shareholders, local ratepayers, customers, employees and the wider community. Compare this with the track record of Ports of Auckland or virtually any other council-controlled port in New Zealand, which is mixed at best, and it is crystal clear which approach has worked better.
Councils should not run businesses "because they usually don't have the skills to do it very well. Ratepayers get stuck with any failings and end up subsidising many of these enterprises. I believe the mixed ownership model is superior to councils owning and running businesses," Lister said.
Ports of Auckland says its directors are highly qualified: "Collectively, our directors hold experience developed during successful careers in shipping, logistics, transport and management in New Zealand and abroad and have extensive experience at both executive and board levels."
Other financiers questioned the Auckland port's ability to expand, saying its growth model was highly constrained by a land shortage, therefore, its future growth potential was strangled.