Canada's state-backed pension fund said on Monday it will seek up to 49% of New Zealand's Auckland International Airport as a rival Dubai-based deal looks set to fail.
Shares in Auckland Airport, New Zealand's main international gateway, rose 1.3% following the approach from the Canada Pension Plan Investment Board (CPPIB), which could capture its target stake for around $1.3 billion at current prices.
One analyst said CPPIB, which had previously sounded out Auckland Airport shareholders, would probably not have to pay much more than the current market price because it was not seeking a majority stake.
"The current levels of valuation are already stratospheric," said Paul Richardson, equities manager at BT Funds management, who holds Auckland Airport shares.
Auckland Airport shares, which last traded up 3 cents at NZ$3.06, have gained 61% in the past year. The stock is trading at 35 times 2006 earnings, compared with Australia's Macquarie Airports at 14 times.
The move by CPPIB comes after a rival bid from Dubai Aerospace Enterprise for 51-60% of Auckland Airport was thrown into doubt on Friday.
State-backed Dubai said the airport company had not done enough to ensure its NZ$2.6 billion ($1.8 billion) deal, backed by Auckland Airport's board, succeeds and was starting proceedings which could see the deal terminated this week.
Analysts say its cash and securities offer worth NZ$3.80 a share now has only a slim chance of success.
Richardson said alternative bidders may emerge for the airport, but the strong public and political opposition to foreign control of the airport may persuade some contenders, including Dubai Aerospace, to look elsewhere.
CPPIB said it was preparing a formal proposal, which would allow two local councils to maintain their combined 23% stake in the airport operator.
"We aim to deliver significant value to (Auckland Airport) shareholders, while preserving ongoing substantial levels of New Zealand ownership of the airport," said Mark Wiseman, senior vice president of private investments at CPPIB, adding that they were backing the current management team.
The Auckland City Council is expected to formally decide to retain its 12.75% later on Monday. Polls have shown as much as 90% public opposition to the Dubai proposal.
Airport assets around the world have been drawing investors because of their stable, long-term revenue streams, fuelled by a boom in air travel.
In June, CPPIB approached a number of Auckland Airport shareholders to gauge interest for a takeover offer at NZ$3.10 a share, which was rejected as being too low.
The CPPIB, with around $114 billion in assets, already has infrastructure investments including a 27% stake in a Chilean transmission company and a one-third share in Britain's Anglian Water.
New Zealand utilities investor Infratil holds a 6% stake in Auckland Airport in conjunction with the state pension fund, and some analysts believe it might be preparing an offer.