“Woolworths opened its first store in New Zealand in 1929 and then sold the business in the 1980s, only to buy it back in 2005. So they have exited once already.”
As to whether a sale could be possible, Morris didn’t want to speculate.
“There would be global interest in the business. Hope springs eternal and there would be someone that would think they could fix the business. Woolworths Australia just might not like the price.”
Craigs Investment Partners director Geoff Zane said in reaction to AFR’s article that it was “a welcome opportunity for the IPO-drought on the NZX”.
But Morris said that if Woolworths were to list the business it “would be a sign that there were no trade buyers”.
The calls follow a tough year for Woolworths Group despite a positive result, with the New Zealand supermarket arm underperforming compared to its other businesses.
In its annual results, wage costs outpaced sales growth, leading to normalised earnings before interest and tax (ebit) falling 57.2% to $108 million, compared to $249m in FY23.
Questions put to Woolworths about whether it was considering a possible sale of its New Zealand arm went unanswered.
Biggest capital raise ever
Auckland International Airport’s $1.4 billion capital raise was sooner and bigger than many analysts had expected but the institutional portion was snapped up quickly by investors keen to get a slice of the airport.
Stock Takes understands the $1.2 billion institutional portion was raised by lunchtime Monday, with the book fully covered by midday – an impressive uptake within just three hours of the market opening.
But that didn’t mean the investment bankers got any rest – they pulled an all-nighter the day of the deal with the offer remaining open until 4am on Tuesday for global institutional investors.
An NZX spokesman confirmed the raise was the largest capital raise on the New Zealand sharemarket.
Shane Solly, portfolio manager at Harbour Asset Management, said the raise was bigger and sooner than some had expected.
“What it does is provide really comfortable headroom against key debt metrics and also gives the airport financial flexibility for future capital investment.
“It makes logical sense to raise the capital at the point where they have a degree of certainty around what investment is required to support the domestic terminal expansion – obviously that’s quite a meaningful piece of that capital investment stack.”
As part of the capital raise the airport announced it had signed a deal with Downer-owned Hawkins for an $800 million contract for work on the domestic airport.
Forsyth Barr analyst Andy Bowley said the size of the raise suggested a conservative approach by the airport to managing its balance sheet.
“The additional equity should mean Auckland International Airport navigates the bulge of capital expansion over the medium term, without getting close to testing its key S&P A- credit rating of funds from operations (FFO) to debt threshold, even with the prospect of aeronautical price cuts in FY26 and FY27.”
Management had previously suggested it might need to raise up to $1b.
Bowley said he suspected it was bigger than that because aeronautical capital expenditure in FY25 was likely to increase beyond that already announced so far, the potential for the aeronautical price cuts being in the mid-teens and S&P may have expressed some concern over the airport’s debt in the medium term.
“All said and done, not much changes from a valuation perspective (i.e. no impact on AIA’s enterprise value) as a result of the equity raise, notwithstanding marginal dilution on a per share basis.”
Bowley kept its rating on the stock at neutral but dropped its target price from $8.15 to $8.05. Auckland Airport’s shares opened on Thursday at $7.50.
Solly said demand would have been strong from international investors.
“This is one of the very few listed airport operations globally – you really have to look at the investment universe – there’s a lot of big infrastructure funds just investing in infrastructure and they like to have stakes in listed companies; there’s the transparency.
“It is actually quite hard to get exposure to a pure single high-quality airport. I wouldn’t be surprised to see some international investors use this as an opportunity to build a stake in the business.”
Auckland Council stays out
However the Auckland Council, which had an 11% stake in the airport did not take part in the institutional capital raise, unsurprisingly given it sold off 7% of its stake last year.
In a statement on Tuesday afternoon, the council said Auckland Mayor Wayne Brown and Deputy Mayor Desley Simpson had carefully considered the opportunity but had “decided not to participate”.
Market commentators are widely expecting the council to sell down the rest of its airport stake at some point this year and it moves closer to investing the money via an Auckland Future Fund.
It took a step closer to the fund being up and running earlier this month by appointing three board members. The directors include chair Christopher Swasbrook, David Callanan and Craig Stobo.
Swasbrook and Stobo are names well-known and respected in the local capital market.
Swasbrook is the founder and managing director of Elevation Capital and also sits on the board of regulator the Financial Markets Authority. Stobo is the chair of the FMA as well as chairing the Local Government Funding Agency. Callanan works for the Public Trust and is currently the general manager, Corporate Trustee Services – the arm that acts as a supervisor for many KiwiSaver and other managed funds.
The board is expected to make key decisions on how the fund will operate once in place.
Contact-Manawa deal not a done deal
Contact’s $2.3 billion takeover bid for Manawa only has a 50% chance of getting Commerce Commission approval, according to analysts at Forsyth Barr.
Andrew Harvey-Green and Hugh Lockwood say in the first instance the deal should be straightforward given it would only reduce competition in the market from five generators down to four and would increase Contact’s market share from 21% to 26%.
”However, the Electricity Authority has raised generation market structure issues in the past, and any increase in market concentration will likely be analysed carefully. From our perspective, it is a 50/50 call whether Contact will get clearance.”
The analysts also warned it would not happen quickly noting that other clearances by the commission had taken up to 11 months.
”With the electricity sector currently under intense political/regulatory focus, we expect the ComCom will take its time.”
The offer price of $5.95 per share was a 20% premium to Manawa’s pre-offer valuation but the analysts said to create synergies for Contact shareholders it would have to deliver at least $33m – the bottom of the $33m-$48m range.
”We believe hitting the bottom of the range is challenging, but doable.
”If the deal does get over the line the analysts predict it will leave Contact’s balance sheet looking stretched.”
Contact has not raised equity for this deal, but the likelihood that it raises equity to fund future developments has increased.
”Infratil, which would own 9.5% of Contact and Tect Holdings (5%) post the deal are not expected to be long-term shareholders of Contact.
”We do not see either party as long-term holders of Contact, although we do not see them being immediate sellers either. For Infratil, a sell-down is most likely when it has alternative needs for the capital.”
Despite the challenges of the deal Forsyth Barr maintains an outperform rating on Contact with a target price of $10.65.
– additional reporting Madison Reidy
