- Australia’s competition regulator ACCC has approved a AU$23.6 billion takeover deal of Sydney Airport.
- ACCC believes any lessening of competition after the proposed acquisition would not be substantial.
- The SYD share price has risen to a new 52-week high of AU$8.6.
Australia’s competition regulator Australian Competition and Consumer Competition (ACCC) on Thursday approved a AU$23.6 billion takeover deal of Sydney Airport (ASX:SYD). After the approval, it has become one of the country’s largest buyouts ever.
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The greenlight from ACCC comes nearly a month after Sydney Airport agreed to a takeover deal by Sydney Aviation Alliance (SAA). SAA is a consortium of investment funds, each having investments in a range of Airport’s infrastructure assets, including shareholdings in other Australian airports. These funds include Global Infrastructure Management, LLC, IFM Australian Infrastructure Fund, Conyers Trust Company (Cayman) Limited as trustee for IFM Global Infrastructure Fund, QSuper Board as trustee for QSuper and AustralianSuper Pty Limited.
According to ACCC Chair Rod Sims there is a little, if any, competition among Australian airports. He said, “This is no surprise, as we’ve been saying for a long time that Australian airports such as Sydney Airport are natural monopolies, with significant market power and no price regulation. The proposed acquisition is therefore unlikely to substantially lessen competition in a market that already has such little competition.”
However, the ACCC does not deny the fact that there is some potential for a minimal competition amongst airports regarding aeronautical services in case airports are situated in close proximity to each other. Still, the ACCC believes any lessening of competition would not be substantial.
During the investigation, the ACCC was faced with concerns from interested shareholders like airlines, service providers, retailer groups, etc. that the acquisition would also lead to a disbursement of information between airports with common stakeholders. This could give airports an upper edge in the pricing power against users of the airport.
However, emphasising the lack of competition, the ACCC said, “We understand the stakeholder concerns, however, fundamentally the lack of competition between airports means that any such sharing of information between airports would not amount to a substantial lessening of competition, which is what the law requires before we can oppose a merger”
Data Source: Refinitiv
The SYD share price has risen to a new 52-week high of AU$8.6, currently up by 2.81% to AU$8.58 (as of 12:30 PM AEDT, 9 December 2021). The stock has recovered well this year, after being hammered amid COVID-19 concerns in 2020, delivering a year-to-date return of 33.93%.