Friday, April 11, 2008

Auckland Airport is not a strategic asset that was for sale

Listen and listen good. The Auckland International Airport was not being sold. It was impossible for a strategic asset of New Zealand to be sold here as Winston Le Peters and others would have you believe. Accordingly the decision to allow the Canadian Pension Fund (CPP) to own 40% should have been granted if the decision not to grant was based on the strategic asset argument. In fact the strategic asset was immediately lost when Le Peters sold it when Treasurer of the National Government of 1996 - 1999. It's his fault it's no longer a strategic asset and here's why and it's actually very simple.

The asset of the company is the land and operational functions of the Airport business. I guess to be precise the asset is the land. Pretty much nothing more, nothing less. That is the asset that Le Peters, Parker and Cunliffe were scared of losing. But I'm not gonna mention the fact the land can't be removed even if the shares were sold. That certainly is one argument, and a good one. I am going to discuss the legal situation which explains very simply why the government is wrong.

The Company, Auckland International Airport Limited, has approximately one billion shares on issue. These shareholders have paid money (capital) for their shareholding. They either bought their shares off others, or they purchased new shares if the company decided to raise capital for expansion. The shareholders' return on their capital investment is twofold: dividend from profits earned by the company or capital gain from share price appreciation, upon which they might sell their shares. The CPP wanted to buy 40% of current shares on issue and give these shareholders a capital profit. It did not want to buy the assets of the company. That is a vital distinction. All the shareholders really have is a right to trade their shares. Remember that Winston le Peters gave them that right.

What the shareholders also do not have is a proprietary interest in the assets of the company. The law is clear in that regard despite the fact that the company owns large land assets. Let me explain that clearly: the law says, and has for hundreds of years, that shareholders do not own the assets of the company. All they have is their capital investment.

The land assets here are owned by the company. The assets were not being sold, rather the shares were. Therefore, it was impossible for a strategic asset of New Zealand to be sold.

But you won't hear that from the 9th floor.


Adolf Fiinkensein said...

Excellent post Gooner. The only trouble is, it's unlikely anyone bright enough to own shares in Auckland Airport would have voted Labour anyway.

Anonymous said...

Very good. Thanks

Clunking Fist said...

It's even more simple: The land can't be dug up and removed to Canada, ergo there is no danger.

Some people are feeble minded (and vote Lrbr, Grn or WinFirst). Maybe they think Coke, IBM, Microsoft and Ford are locally owned?

On a somewhat not related point: have those fucking STUPID ads with the high tech robot convinced anyone to buy NZ made?

Anonymous said...

Q: So where would the dividends paid on that capital investment go?

Gooner said...

Anon - first, they were willing to invest 1.4 billion straight into NZ.

Second, they're already going overseas now thanks to Winston Le Penters.

Third, that's not why the government declined the application. They were protecting their 'strategic asset' but the 'strategic asset' was not being purchased.