Sydney Airport is at the centre of an emerging bidding war. Here’s why investors are betting big on a travel recovery.

Institutional investors are betting on a travel recovery in Australia. (James D. Morgan, Getty Images)
  • Sydney might still be locked down, but its airport is at the heart of the largest acquisition bid on record.
  • Last week a consortium of superannuation and investment funds launched a surprise bid for the airport, worth $22.3 billion, with Macquarie Bank now reportedly putting together a rival offer.
  • It demonstrates a billion-dollar bet on a travel recovery, as funds put their faith in a post-pandemic boom.
  • Visit Business Insider Australia’s homepage for more stories.

The big money is seeing through Australia’s latest outbreak, believing that open borders and a travel resurgence are just around the corner.

A bidding war has erupted over the nation’s largest airport, after a group of super funds lobbed a $22.3 billion bid for the asset, which has languished on the ASX over the last 12 months.

IFM Investors and QSuper, backed by US investment fund Global Infrastructure Partners (GIP), made their move last Friday, submitting a cash offer of $8.25 per share, well-above the trading price of around $5.80. Between them, the consortium manages more than $360 billion.

The unsolicited bid put a rocket under the share price, with Sydney Airport’s board to spend another week to mull it over and decide whether or not to sell one of the last publicly-listed airports left in the world.

With investors hard-pressed to find value in the current market, it didn’t take long for another competing bid to begin taking form.

Macquarie Bank, which oversees $562 billion in assets, is reportedly trying to orchestrate a pitch of its own, seeking to form its own interested party.

If the Bank doesn’t find enough interested parties of its own it could also simply join IFM’s bid, according to insiders speaking to Bloomberg.

Institutional money backs a travel recovery

Regardless of whether a bid is ultimately successful, it highlights a few broader themes developing in and out of capital markets.

The sudden surge of appetite for Sydney Airport, operating at just a fraction of its normal capacity, shows how investors are looking beyond the pandemic.

At the moment the city itself is locked down and grappling with its latest outbreak, as international borders remain firmly shut, as Australia slashes arrival caps, and as some doubt creeps in as to just how long it may take the nation to open up again.

Yet simultaneously, institutional investors are looking to allocate tens of billions of dollars to a future recovery and potential boom that is at least a year away, and potentially much longer, in Australia.

It’s partly driven by a merger and acquisition (M&A) rush, as markets consolidate to deal with the opportunities presented by the pandemic. So too do markets at all-time highs mean there is little genuine value available for those looking for a place to deploy cash reserves.

Certainly, assets within the travel and aviation sectors represent a few of the remaining opportunities left for those who are banking on a return to normal. Falling interest rates and rising asset prices have only inflated demand for infrastructure projects further.

Yet the bid – and possible bids – on Australia’s busiest international terminal shows there’s still plenty of confidence that such a scenario is not only still possible, but even probable.

But it the scale of the bid which is perhaps the biggest demonstration of faith. If successful, the $22 billion sale which would not only rank as Australia’s largest acquisition on record, and would be among some of the most expensive airport sales internationally, in the midst of a global pandemic no less.

It’s not as if the prospective buyers lack any exposure to the aviation industry either. IFM Investors already has a stake in Australia’s next four largest airports as well as a handful of international ones, while GIP maintains a stake in three UK ones to boot.

Both are now looking to double down.