One of the part-owners of Sydney Airport, German construction group Hochtief, has been forced into an embarrassing backdown on plans to part float its infrastructure arm on German markets.

The company, which also owns 55% of Leighton Holding in Australia, the big contractor), pulled plans to sell up to 49% of Hochtief Concessions, which owns stakes in toll roads, a military base and airports, including 5.61% of Sydney Airport.

Besides Sydney, Hochtief Concessions runs airports in Athens, Budapest, Düsseldorf, Hamburg and Tirana; hardly growth businesses and the presence of Athens in the float would have sent up alarm bells with that country high on investor lists of the country most likely to default in mainland Europe.

Hochtief controls another 6.5% of Sydney airport through a three-way partners with Hastings, an Australian fund manager and a big Canadian investment group. It was not included in thchtiefe proposed float.

“As a result of the most recent disturbances in the international capital markets, the capital market environment has deteriorated decisively,” Hochtief said in a statement, on the eve of the planned listing. “Under these conditions, the target value defined by the two companies cannot be realised.”

Hochtief had been looking for as much as 24-29 euros for each share in the float, which would have been the biggest Initial Public Offering in Germany this year. But according to reports in various European business media, interest flagged in the float and bids were received for less than 75% shares to be allocated, at prices well under the 24 euro minimum.

Hochtief blamed the eruption of the debt crisis in Dubai for the trouble in selling its float.

Citigroup, Deutsche Bank, Goldman Sachs and Barclays Capital were the honey-tongued advisers to the float, but not even these risk riders could drum up enough interest from European investors.

Hochtief’s infrastructure group had said it intended to sell up to 600 million euros worth of new shares, and the parent company making up to 400 million euros of shares, while retaining a stake of at least 51% and control.

The float would have provided an arm’s-length, market-based valuation for Sydney Airport, which is 82% controlled by Macquarie Airports. The valuation would not have been firmly based, but it would have provided an indication to outside investors of the way the market saw the present value of the airport.

But that is not to be, now the float has flopped.

Peter Fray

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