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New Zealand airport bid in doubt after tax loophole closed

New Zealand airport bid in doubt after tax loophole closed

Auckland International Airport shares fell 12 percent Tuesday on speculation that a partial takeover bid could be in doubt after the government moved to close a tax loophole.
Canada Pension Plan Investment Board is seeking a 40 percent stake in New Zealand's main gateway airport in a deal with a cash component and stapled securities comprising a mix of ordinary shares and convertible notes _ partly tax deductible for investors.
Last night the government moved to plug the tax loophole involving stapled stock instruments, including those being offered for the airport.
"The risk to tax revenue must be dealt with as a matter of urgency," the finance and revenue ministers said in a statement.
They said the move was announced without consultation with interested parties because of growing interest in using the stapled stock instruments in New Zealand following their international popularity.
Companies can use stapled stock instruments to pay tax-deductible interest to shareholders as a substitute for dividends, creating problems for tax-gathering if the instruments are issued by foreign investors in New Zealand companies.
CPPIB has offered NZ$3.6555 a share in the airport, reducing to NZ$3.5980 as a result of a NZ$5.75 cents a share interim dividend to be paid next month.
The CPPIB bid was worth some 1.8 billion New Zealand dollars (US$1.4 billion; euro959 million) and valued the airport company at NZ$4.46 billion (US$3.6 billion; euro2.4 billion).
Tuesday's stock price slide cut some NZ$415 million (US$338 million; euro228 million) from the company's capitalization.
Just hours before the tax change was revealed, CPPIB expressed confidence the bid would be successful after airport directors on Monday reversed their previous advice and unanimously recommended the deal to shareholders.
Stephen Wright, adviser at ASB Securities, said CPPIB was unlikely to pull out of the bid as a result of the tax changes.
"They have spent a fortune already. If they pull out now they are never going to do it again," he said in a reference to the bid being the second the Canadian investor has made for the airport.


Updated : 2021-03-06 04:54 GMT+08:00