Focus: Heathrow stake sale opens the door for a resurgence in airport deals

Esken

01/12/2023 15:42

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      GIP hires advisers to sell its Edinburgh airport stake
-sources
    

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      Other airport deals in Italy, UK will probably follow
-sources
    

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      Recovery of air traffic post-pandemic encourages investors
    

  
 (Updates first quote)
    By Andres Gonzalez, Emma-Victoria Farr and Elisa Anzolin
       LONDON/FRANKFURT, Dec 1 (Reuters) - In the wake of the
COVID-19 pandemic, a rebound in travel and rising interest rates
is leading some airport owners and operators to sell up after a
dearth of dealmaking in the sector. 
    After Spanish infrastructure giant Ferrovial  FERF.AS 
revealed a near $3 billion deal to sell its 25% stake in
Britain's busiest airport Heathrow on Tuesday, a slew of other
airports across Europe could be up for sale in 2024, according
to bankers, investors and industry sources. 
    "There are green shoots of airports investments coming back
to the market as post-Covid passenger demand recovers and also
as a result of a sharp increase in underlying cost of debt",
said Andras Kranicz, head of infrastructure finance, EMEA at BNP
Paribas. 
    "This has encouraged infrastructure equity investors away
from highly regulated asset classes with relatively low
achievable equity returns towards those which are more volatile,
representing higher demand risk exposure and hence higher
achievable returns," he added. 
    Among the largest of the airports that may see a change of
ownership as soon as 2024, is Edinburgh whose U.S.-based owner
Global Infrastructure Partners (GIP) is working on the sale of
its majority stake in a process that may value the airport at
over 2.5 billion euros ($2.72 billion), according to sources
close to the situation.
    GIP declined to comment.
    AGS Airports, which oversees operations at Aberdeen,
Glasgow, and Southampton airports and is owned by Australia's
Macquarie and Spain's Ferrovial, may also follow, two people
with knowledge of the plans said on Friday.
    Ferrovial and Macquarie declined to comment.
    Until recently there has been a dearth of deals in the
sector which has faced headwinds such as rising interest rates
and environmental concerns that have dampened valuations,
investors and industry sources said. 
    Even including the sale of Heathrow, this year is the
slowest for airport transactions in the past decade, totalling
$5.9 billion globally to date, according to Dealogic data.  
    "Following the COVID-19 pandemic, (there has been) a change
of perception in the investment community," said Agata Lyznik,
spokesperson for trade association the Airports Council
International (ACI) World.
    "Airports as an asset class are now deemed more risky, given
the unprecedented impact the pandemic has wrought on the
aviation industry."
    That means for some investors who have owned these assets
for many years, now is the right time to sell out. Investors
like Macquarie and GIP bought their stakes in European airports
almost a decade ago and are now reaching the end of their usual
investment holding period.
    Among investors mulling their options are France-based
Ardian and Credit Agricole Assurance, minority owners of 2i
Aeroporti, which has a stake in the operator of Milan's Linate
and Malpensa airports, according to three sources close to the
matter. They have hired Mediobanca  MDBI.MI  and Credit Agricole
 CAGR.PA  to find a buyer for a sale of their 49% stake in the
company, the people said.
    Ardian and Credit Agricole declined to comment.
    Catania's airport operator SAC has hired Mediobanca and law
firm Gianni & Origoni to assist in its "preparatory and
operational phase" of a privatisation process, SAC Chief
Executive Nico Torrisi said in an emailed statement.
    Mediobanca declined to comment.
    
    VALUATIONS PRESSURED, SELLERS LINE UP    
    Buoying demand is booming airport travel in the wake of the
pandemic combined with pent-up dealmaking hobbled by travel
bans.
    Next year is expected to be a milestone for global passenger
traffic as figures reach 9.4 billion in 2024, surpassing the 9.2
billion passengers prior to the pandemic in 2019, according to 
ACI.
    Deal activity is heating up particularly around European
regional airports, which are relatively cheaper and easier to
finance for potential buyers than huge hubs, one industry source
said, who declined to be identified because the talks are
private.  
    Valuations that bidders might pay for airports are expected
to be far lower than the 20 times earnings before interest, tax,
depreciation and amortization (EBITDA) multiple paid for Gatwick
airport in 2018, the sources said. 
    Heathrow's sale valued the airport at 14.3 times EBITDA,
according to JP Morgan analysis published on Wednesday. 
    UK's Esken  ESKN.L , owner of regional Southend Airport,
said in June it had started a process for the sale of the
airport. 
    Industrial buyers are interested in the sector too. France's
Vinci  SGEF.PA , recently said its M&A team is "very busy". In
October, Vinci and Australian IFM Global Infrastructure Fund
were selected as preferred investors in a planned aviation hub
for central and eastern Europe where they may invest up to 8
billion zlotys ($1.91 billion).
    On Thursday, Hungary's state-owned Corvinus and Vinci
Airports notified the European Commission of a proposed joint
takeover of Budapest's airport, according to a document posted
on the EU website.
($1 = 0.9184 euros)

 (Reporting by Emma-Victoria Farr, Andres Gonzalez, Elisa
Anzolin, additional reporting by Joanna Plucinska, Mathieu
Rosemain, Editing by Anousha Sakoui and Elaine Hardcastle)
 ((emma-victoria.farr@thomsonreuters.com;))