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Case study: sale of Sydney Airport - Southern Cross Consortium

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Abstract

In mid 2001 the Federal Government announced its intention to sell Sydney Airport to private investors.

Deloitte was approached by Macquarie Bank to assist it and its fellow consortium members in relation to the proposed acquisition of SACL.

Challenge

In order to adequately assess the potential investment, the consortium required due diligence advice, structuring input and modeling assistance.

This transaction was the largest ever trade sale in Australia and as a result considerable project management skills were required to ensure that all information was reviewed and that issues were communicated swiftly across the various team members and other consultants that included legal advisers, environmental consultants, insurance consultants, retail consultants, car park consultants and air industry specialists.

The sale process was complicated by the events of September 11 and the collapse of Ansett, both of which had a considerable impact on the Airport's operations. Following these events the Government deferred the sale of the Airport, as Government believed it would not extract full value for the asset if the sale were to proceed to the original timetable. Following the restart of the sale process, it was important to consider the impact of the above events in order to assess the underlying earnings of the business.

Approach

Deloitte Corporate Finance undertook detailed financial due diligence on Sydney Airport including reviewing information provided by the vendor on compact discs and more sensitive information provided in a secure data room.  Our due diligence report was then used by the Southern Cross Consortium to provide input into its valuation model for Sydney Airport.

The Deloitte team met and liaised regularly with other advisors and was an integral member of the due diligence committee, enabling us to understand issues as they arose and communicate our findings to others. In addition, a process was set up whereby all issues identified were cross-referred to other advisers for the consideration.

Solution

The Southern Cross Consortium was successful in its bid for Sydney Airport and completed the purchase on 29 June 2002.

Following the successful acquisition of Sydney Airport by the Consortium, Deloitte was further engaged to prepare an Investigating Accountants' Report on the historical performance of the Airport and to undertake a Review of Directors' Forecasts for inclusion in a prospectus for the public offering of FLIERS in Sydney Airport.

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