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Why the Sydney Airport share price has lifted


The market value of Australia’s biggest airport operator is up 46% over the last 12 months.

It is looking like a great start to the week for Sydney Airport (ASX: SYD) shareholders, with the stock flying in early trade on Monday. At the time of writing, its shares had lifted more than 5.1% to hit a fresh 18-month high of $8.41.

What is lifting the Sydney Airport stock price?

Australia’s biggest airport on Monday received a revised takeover proposal from its seemingly persistent suitor, Sydney Aviation Alliance.

The consortium of IFM Investors, QSuper and New York-based Global Infrastructure Partners has now boosted its offer price another 3.6% to $8.75 a share. This is its third bid and improves on the previous bids of $8.25 and $8.45 a share and now values the airport operator at $23.6 billion.

More importantly, the bidders now seem to have the backing from the target company’s board. In a statement to the ASX, the Sydney Airport said it will grant SAA the opportunity to conduct due diligence, which would likely take 4 weeks.

It also said that if the consortium’s binding proposal remained at $8.75 a share, then its board intends to recommend that shareholders vote in its favour.

This suggests it has had a change of heart, no doubt helped by the improved price. Sydney Airport had dismissed SAA’s previous offers as “opportunistic” given the significant impact of the pandemic on the airport’s performance.

Sydney Airport shares last closed at $8.00 on Friday.

Long term bet

The likely deal, which would be one of the largest takeovers in Australian corporate history, comes at a time when COVID-19 has led to a collapse in travel demand.

Australia's domestic travel has already been severely disrupted for the last 2 months and international borders are likely to remain closed at least until the end of the year despite the rapidly advancing vaccine rollout.

Sydney Airport has seen its international passenger numbers plunge by more than 90%. It recorded a $97.4 million loss in the first half of 2021, with revenue down by a third due to the slide in flying activity.

Still, the consortium of superannuation funds is taking a longer-term view on the pandemic-battered travel sector, where demand is expected to rebound sharply when borders reopen.

Before the initial proposal in July, Sydney Airport shares had slumped 30% since their pre-pandemic level in March 2020. The stock is now up 46% over the last 12 months, with most of the gains coming since the SAA offer.

Meanwhile, UniSuper, Sydney Airport's biggest shareholder with a 15.3% stake, has already indicated its willingness to rollover its stake in the privatised company, as required as part of the bid conditions.

Think Sydney Airport shares are a buy?

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