Few things set the rumour mill droning on more than the sale of an airport. Factor into that the world’s biggest infrastructure fund, Europe’s busiest passenger hub, and eye-watering multiples… and you can barely hear yourself think.
The acquisition in December of a majority stake – 50.01% – in London Gatwick Airport by French construction giant Vinci for £2.9 billion late has had just that effect.
Once the sale is finalised, Vinci will own a majority of the London airport alongside:
- Global Infrastructure Partners – 21%
- Abu Dhabi Investment Authority – 7.9%
- Future Fund Board of Guardians – 8.6%
- CalPERS – 6.4%
- National Pension Service of Korea – 6%
This deal values the airport at almost £6 billion, registering a healthy uptick on the £1.5 billion GIP paid BAA (Ferrovial) for Gatwick back in 2009… a theme that we see repeatedly played out across this space.
However, as with all airport deals, everyone’s sucking teeth at multiples of EBITDA and the price paid, shaking heads mournfully at a return to the heady days of 2006… but there’s a lot more to this sale than meets the eye – if what we are hearing is to be believed.
To set off on the right foot, it is essential to underline that all statements made from this point on are not sourced from the stakeholders, but are an amalgam of rumours from those in the know.
Grinding the rumour mill
Gatwick (rated BBB+ by Fitch) sits within Global Infrastructure Partners II, a vehicle with a vintage year of 2012 and a 10-year lifetime. Debt on the airport acquisition has yet to be arranged, and it is expected to be done-and-dusted by June, at which time the acquisition will be formalised.
As such, the timing sits comfortably within the lifetime of the fund which reached final close in October 2012 and its partial disposal (GIP retaining 21%) at this stage comes as little surprise.
At first glance, it came as a surprise that GIP will continue to run the airport and that the management team remained unchanged, given the dramatic shift in ownership.
Beyond that, the valuation at 20x EBITDA from Vinci (rated A- with a positive outlook by Fitch) is too good an offer for the shareholders to walk away from.
As to GIP retaining 21%, we understand that the fund manager would have liked a complete exit, but that – having brought in the other shareholders – it felt obliged to stick it out for the duration.
Seemingly, it would have been viewed darkly had the mature financial investor left its passive investor partners that it brought to the table in the first place, leaving them stranded with an operations partner they did not know so well.
In all likelihood, had GIP exited Gatwick entirely the minority shareholders would have followed suit… and that’s a size of cheque Vinci is not in a position to sign.
It all sounds curious, but when you start joining the dots and looking at it like a strategic play by GIP and Vinci, it starts to make a lot more sense.
Having created a partnership in Gatwick, GIP and Vinci are now well positioned to partner up for the next big deal in Europe – ADP, the airport operator whose primary assets are Paris Charles de Gaulle and Orly airports.
Vinci will need the muscle of a partner like GIP to bid for Groupe ADP – formerly Aéroports de Paris – which is expected to be one of the first assets on the block for French President Emmanuel Macron's privatisation programme.
France owns 50.6% of ADP, which has a market capitalisation of €16.5 billion (11 January) and Vinci already has an 8% stake in it. However, it may take a while before this process is launched as France wrestles with challenging market conditions and a volatile political environment.
From GIP’s side, partnering with a French construction heavyweight and established airport operator is (let’s be honest) essential for its bid for ADP to even be considered.
By partnering with Vinci on Gatwick, GIP instantly gains the all-important Gallic credentials to pitch for ADP while growing its reputation in the airport space with a skilled partner.
As for the rumour that Vinci believes one day it will be able to open up the second runway at Gatwick for daily use – fat chance.