Auckland - an awkward acquisition

As long-running sagas go, the on-off acquisition of New Zealand’s Auckland International Airport by a foreign entity – be it Dubai Aerospace Enterprise (DAE) or the Canadian Pension Plan Investment Board (CPPIB) – takes some beating.

In retrospect, perhaps the surprise resignation in November of the airport board’s chairman, John Maasland, looks like an early warning of things to come. But who on earth would have expected the Kiwi government to commit what is being seen as a last-ditch act of self-defence against Auckland airport being taken over?

New Zealand’s government desperately wants to say no to the CPPIB deal, but it cannot do so without risking a potentially damaging judicial review. So a new regulation under the Overseas Investment Act was written.

Overnight rule change

On the night of Monday 3 March, after the Australian share market closed, the government changed overseas investment rules ensuring that the two ministers with the final say-so would be able to say “No" to the deal even if the country’s Overseas Investment Commission (OIC) approved the sale. Justification for the new rule is said to be the government’s desire to guarantee that New Zealand retains control of ‘strategically important infrastructure on sensitive land’.

On its own, that seems a perfectly logical and sensible thing for any government to do. But with CPPIB planning to acquire a minority 40% of Auckland International, it’s hard to understand just why those who changed the rules did not believe the remaining 60% still gave New Zealand control over the strategically important Auckland airport and the sensitive land on which is stands.

Enter the ‘we-would-have-been-robbed’ theory. Monday’s night-time rule change followed moves the previous week to shut off a multi-million-dollar tax break that would have allowed CPPIB to gain more from the deal at the expense of New Zealand’s taxpayers. Most taxpayers are, of course, voters. And they have long memories when the time comes to cast their vote.

Long-term repercussions

But what of the repercussions of a move many see as politicking in the extreme?

Despite all the politicking, CPPIB insists it’s still pressing ahead with its bid. The Board has, no doubt, invested considerable sums already in the bid, but in the light of all these recent changes, it is showing considerable determination to succeed.

In the long-run, however, as one analyst was quick to point out, the rushed law change, midway through negotiations for Auckland airport, is likely to create uncertainty in New Zealand's financial market and deter overseas funds from investing in the development of the country’s infrastructure.

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