Infratil has rejected a takeover bid that valued it 22 percent above the market, saying the potential buyer undervalued the company's assets.
The company, which has shares in Vodafone, Wellington Airport, Trustpower and data centres among others, turned down AustralianSuper's unexpected $5.4 billion bid on Wednesday.
"AustralianSuper went to the board of Infratil to try and arrange a friendly takeover - they'd get to do due diligence, and also, in all honesty, it has more likelihood of going ahead," Frances Sweetman of Milford Asset Management told The AM Show on Thursday.
"It wasn't for sale, but the offer was at a 22 percent premium to the share price. So this is the interesting thing for shareholders - why does AustralianSuper want to pay 22 percent more than shareholders want to pay for these assets?"
Infratil's share price immediately jumped 20 percent on the announcement, nearly matching AustralianSuper's valuation of the company, New Zealand's 10th-biggest.
Sweetman said there are a few reasons why AustralianSuper was willing to pay well above the market rate for Infratil.
"Infrastructure assets are increasingly popular in this low-interest rate environment because they deliver good, steady cash flows that are much more attractive than the low-interest rates. And also for the value of their assets - which on the share market do trade at a discount to the underlying asset value."
That's because of how the company is structured.
"It's managed externally. Rather than the company which holds the assets also holding the management team that looks after them, as you'd find in a normal company, the company that owns the assets simply is a shell for the assets. They pay a fee to [asset management firm] Morrison and Co to manage it, which includes performance fees."
There's also plenty of growth opportunities for Infratil's assets, Sweetman said, which might not be reflected in the short-term share price.
"AustralianSuper is prepared to sit back and take a longer-term view on these assets than shareholders."
Like the Dow Jones and other offshore exchanges, the New Zealand share market NZX has had an "incredible" year, despite the economic woes.
"What a rollercoaster ride. We saw a huge dip in April, then it has accelerated back better than anyone would have anticipated."
The NZX is up 11 percent since January - but up a massive 52 percent since the depths of March, when the sheer scope of the coronavirus pandemic became clear and markets around the world plummeted.
The Dow Jones in the US has had similar results - up 5 percent since January, but 61 percent since March.