Auckland Council has voted to sell 7 percent of its shares in Auckland Airport reducing its stake to 11.1 percent as part of a plan to reduce its debt and limit rate rises.
So what happens now? How does an investor sell 103 million shares, and who is likely to buy?
One hundred shares or 100 million the process is much the same - you put them up for sale and invite bidders. With a big parcel the number of likely bidders will be limited, so broking houses and investment advisors are hired to help.
Auckland Council has hired Melbourne firm Flagstaff to advise on the selection of larger firms to handle the sale, which will likely attract big international investment firms such as UBS, Macquarie, Goldman Sachs, JP Morgan, Citi, and Credit Suisse, with global reach to tap interested foreign investors.
Local firms such as Forsyth Barr, Jarden Securities and Craigs Investment Partners will likely partner up with foreign firms to look for New Zealand buyers as well.
Setting a price
On the most basic level - supply and demand. Strong demand and limited supply will underpin prices.
The current shareprice of $8.75 (valuing the council stake at $901m) is a pointer only, and larger parcels are often sold at a discount to ensure there are buyers.
The investment analysts swim in an alphabet soup of acronyms when they crunch estimates of asset values, using DCF (discounted cashflows), P/E ratios (price to earnings ratios), EV/EBITDA ratio multiples (enterprise values to earnings before interest tax, depreciation, amortisation).
Leave it to the professionals, that is what they get paid big commissions for.
After a suitable period of calculation and recalculation, the brokers will go hawking the shares, possibly as one big block or more likely in smaller parcels to a range of buyers.
The shares will not turn up on Sharesies.
Who will buy?
Specialist infrastructure investors, such as Infratil, which already owns 66 percent of Wellington Airport; investment funds looking for a good asset to put into a specialist fund or as part of their diverse range of assets - the NZ Super Fund currently owns 1.3 percent, ACC owns 2.49 percent.
Investment funds with small stakes generally sit quietly in the background and bank any dividends, while looking at moves in the shareprice for when they think is the right time to buy more or sell their stakes.
When Sydney Airport was sold in 2022 for AU$23.6b it was snapped up by a consortium of infrastructure investors.
Big overseas investment funds have an appetite for good New Zealand assets, and Auckland Airport offers not just exposure to the travel rebound, but it has large commercial property holdings being sought by retailers, logistics and other firms.
Could the sale be stopped?
The Overseas Investment Office will likely need to give approval - or more likely the relevant ministers.
Generally minority stakes change hands with no problems, but given political sensitivities about foreign control of a strategically important business there may be closer scrutiny.
An attempt by a Canadian pension fund to take a 40 percent stake in 2008 was vetoed by the then Labour government.
Is the remaining 11 percent council stake a protection against takeover?
Yes ... and no.
Under the Takeovers Code a 10 percent or more stake would block a buyer trying to take complete control.
Most recent takeovers in this country have been done by schemes of arrangement, a deal worked out between a company board and would-be buyers, and then presented to shareholders for approval, offering minority shareholders little or no chance to hold out or block a sale.
Once in a while the shareholders revolt and force a higher price, as in the recent Pushpay Holdings takeover.
But big investors may see the sale as a sign that, in due course, Auckland Council's remaining stake will be up for sale.