Sydney Airport (ASX: SYD) has rejected a $22.6bn acquisition offer from a consortium led by IFM Investors.

In a 15 July announcement, Sydney Airport said its boards had unanimously concluded that the indicative proposal undervalued the business and was not in the best interests of shareholders.

The consortium responded saying it was “surprised and disappointed” as it believed its offer was extremely attractive given the challenges faced by the airport.  

The company said the bid had been opportunistic in its timing given the significant impact of the COVID-19 pandemic on its performance. It noted that the indicative price of $8.25 cash per stapled security was below the price at which the securities had been trading before the pandemic.

“The boards recognise that the security price is likely to trade below the consortium proposal’s indicative price in the short term, however Sydney Airport will only progress a change in control transaction on terms that deliver and recognise appropriate long-term value for Sydney Airport security holders,” the announcement said.

The Sydney Aviation Alliance responded saying it believed its offer was extremely attractive for security holders “given the considerable short and long-term challenges faced by Sydney Airport”.

The consortium comprises IFM’s Australian and global infrastructure funds, QSuper and US-based Global Infrastructure Partners.

The consortium said its proposal represented a very significant premium to recent market prices including a 43% premium to Sydney Airport’s immediate pre-proposal closing price on 1 July 2021 of $5.75 and an 81% premium to the issue price of $4.56 in Sydney Airport’s $2 billion equity raising in August 2020. Adjusted for the new securities issues and the proceeds raised in the equity raising, its offer was worth $8.99 cash per stapled security.

“Any assessment of Sydney Airport security prices before the pandemic is of limited relevance given the company’s materially changed circumstances and challenging outlook,” the consortium said. “This includes potentially significant reductions to demand arising from the pandemic, the introduction of a competitor airport in western Sydney in 2026 and changes in business and consumer travel preferences.”

Sydney Airport reported it had received the consortium’s offer on 5 July.

The company said then that the offer price represented a 42% premium to the 2 July closing price of $5.81, however, this was far below the pre-pandemic share price.

Shares in Sydney Airport reached a record high of $8.86 in January 2020 before COVID-19 affected international travel.

Conditions of the offer included that superannuation fund UniSuper, which holds about a 15% stake in Sydney Airport, would reinvest its interest for an equivalent equity interest in the consortium’s holding vehicle rather than receiving cash.

UniSuper said it had no knowledge of the proposal outside the information that had been publicly disclosed. It did, however, in principle, see merit in Sydney Airport being converted from a publicly listed company to an unlisted company. It also viewed the consortium partners favourably.

Other conditions of the offer were that Sydney Airport provide the consortium with due diligence access to its books, a unanimous recommendation from the Sydney Airport boards that security holders back the proposal, and entry into a mutually acceptable scheme implementation deed between Sydney Airport and a consortium acquisition vehicle.

The offer proposed that the acquisition be completed by way of a scheme of arrangement and trust scheme.

Sydney Airport is receiving financial advice from Barrenjoey Capital and UBS and legal advice by Allens.