Macquarie Bank will finally walk away from Sydney Airport after deciding to offload its cornerstone stake, ending an 11-year tie that has led to it reaping hundreds of millions of dollars in fees and dividends.
The bank's decision to hand $1.4 billion of shares in Australia's largest airport to its own shareholders comes at a critical time for the airport's owners, which are trying to play down the need for a second airport in Sydney. The Abbott government has promised to name a site for a second airport within its first term.
It also puts an end to speculation that Macquarie has been trying to engineer a takeover for the airport to enable it to sell its cornerstone stake at a premium.
After unveiling a $501 million half-year profit on Friday, Macquarie said it would give its shareholders one share in the airport for each bank share they own. With an 18.6 per cent stake, the bank is the airport's largest shareholder and will book a $377 million gain on the handout of shares.
Macquarie's grip on the airport stretches back to 2002, when the Howard government sold a 99-year lease on the monopoly asset to a consortium led by the bank for $5.6 billion.
The bank's satellite airport fund emerged with an 83 per cent stake, and any concerns that it had overpaid for the airport quickly evaporated as the asset was squeezed hard.
"Sydney Airport has been a pretty important asset for Macquarie ... [and] it is very clear that they have done very well out of it," Legg Mason research analyst Andrew Chambers said.
The handover of shares to Macquarie investors was also seen as being "tax efficient" because a sale of the stake would have incurred capital gains tax. "By handing it over to investors ... [individual Macquarie shareholders] should avoid paying any tax until they decide to exit the investment," Mr Chambers said.
In the seven years after the airport was privatised, Macquarie received tens of millions in management fees from its satellite fund, which owned the bulk of the airport.
In 2009, the bank was paid a $345 million fee from Macquarie Airports for severing management ties, yet the airport continued to use Macquarie as an adviser. The airport disclosed in August that it would fork out $54 million in advisory fees and stamp duty to simplify its complex structure, but it declined to reveal how much of that was to be paid to Macquarie.
While the links are about to be severed, several of the airport's managers are former Macquarie executives, including boss Kerrie Mather.
"It will be interesting to see whether Sydney Airport changes the way it does anything," said one analyst. "When it comes to appointing managers, will so many of them come from the Macquarie stable?"
Despite losing the backing of Macquarie, the airport is still well connected in Canberra. Its chairman, Max Moore-Wilton, was a secretary of the Department of the Prime Minister and Cabinet under John Howard.
The latest deal still needs the approval of Macquarie shareholders next month. Macquarie chief executive Nicholas Moore said on Friday it was a "good time" to distribute airport shares to the bank's shareholders so they could "directly participate in its ownership".