Sydney Airport says "no thanks" to new investors
Sydney Airport has rejected a monster $22bn bid from a group of investors.
What's the key learning?
- The more spent on an investment, the harder it is to make a good financial return
- If new investors do buy Sydney Airport for a significant price, they would have to increase the current revenue.
WHY WOULD SYDNEY AIRPORT REJECT SUCH AN OFFER?
Last week, a group of infrastructure investors got together to try to buy Sydney Airport. They offered a 42% premium on the share price.
But now, Sydney Airport has officially turned down the $22 billion buy-out offer.
Even though $22 billion sounds like a lot, the Sydney Airport Board reckons it was a tad opportunistic, and that the airport is actually worth much more.
Sydney Airport didn't rule out selling if there was a better offer on the table.
So, what's the key learning?
The more a buyer pays for an investment (ie Sydney Airport), the harder it becomes for that buyer to make a financial return.
Since there are restrictions on flight numbers at Sydney Airport, it means price hikes may be the way forward if the takeover is successful down the track.
For airports, there are a few ways to increase their revenue:
- Increase the number of flights to/from the airport
- Increase the fee for airlines to use runways and parking their jumbo planes
- Increase the costs to consumers (think: parking)