Chinese Investment Corporation buys 10% stake in Heathrow – so Ferrovial now owns only about 34%
China Investment Corporation (CIC), which is China’s sovereign wealth fund, has bought a 10% stake in the firm that owns Heathrow airport – which was called BAA and is now Heathrow Ltd. CIC was set up in 2007 to invest some of China’s foreign exchange reserves. Despite concerns in other countries about Chinese access to key assets, the UK has been developing closer business ties with China. This is CIC’s 2nd major investment in UK infrastructure, as in January, it bought 8.68% of the firm behind UK utility group Thames Water. The latest airports deal will see CIC pay £450m for a 10% stake in Heathrow Airport Holdings Ltd. CIC International, a subsidiary of China Investment Corp, is paying £257.4m to Ferrovial for a 5.7% holding in Heathrow Ltd and £192.6m to its other owners for an additional 4.3%. The deal comes less than 3 months after Qatar Holding, the Middle Eastern sovereign wealth fund, reached an agreement with Ferrovial, Britannia Airport Partners and Singapore’s GIC to buy 20% of Heathrow Ltd for £900m. Ferrovial’s stake in Heathrow will fall from 49% to 33.7%.
1 November 2012 (BBC)
China fund buys 10% stake in London’s Heathrow airport
China Investment Corporation (CIC), the country’s sovereign wealth fund, has bought a 10% stake in the firm that owns London’s Heathrow airport.
Heathrow Airport Holdings’ other UK airports include Stansted, Southampton, Glasgow and Aberdeen.
CIC was set up in 2007 to invest some of China’s foreign exchange reserves.
Despite concerns in other countries about Chinese access to key assets, the UK has been developing closer business ties with China.
“It is fair to say that the UK has a more open relationship with China than many other major economies,” said Stephen Joske, senior manager at Australia Super, a pension fund based in Beijing.
“There is certainly push all around the world for scrutiny of Chinese investment – it has been ringing alarm bells.
“It is unfair to an extent, as these deals are a win-win transaction. Politics has been overshadowing economics.”
British opportunities
This is CIC’s second major investment in UK infrastructure. In January, it bought 8.68% of the firm behind UK utility group Thames Water.
The latest airports deal will see the fund pay £450m ($726m) for a 10% stake in Heathrow Airport Holdings Ltd, which was previously known as BAA Ltd.
Under the terms of the agreement it will buy a 5.7% stake in FGP Topco Ltd from Spanish firm Ferrovial for £257.4m. FGP Topco is the holding company which owns Heathrow Airport Holdings Ltd.
CIC will get the remaining 4.3% stake from other shareholders of FGP Topco Ltd at a cost of £192.6m.
The Chinese investment company is not the first foreign firm to buy a stake in the Heathrow holding firm.
In August, Qatar Holdings bought a 20% stake, and this deal is currently awaiting approval from European competition regulators.
China expansion
Foreign firms are increasingly looking at the UK for investment opportunities as the economic slowdown has pushed down the price of assets.
At the same time, problems in the eurozone have made the UK, which is not part of the European single currency, a more attractive and stable destination.
Earlier this year, Chinese telecoms and computer network firm Huawei Technologies said it was going to invest £1.3bn expanding its UK operations.
And while UK Prime Minister David Cameron said the investment showed that the UK was “open for business”, similar moves in other countries have raised concerns.
Last month, the US claimed that Huawei and another Chinese firm posed a security risk and warned against doing business with them.
In a separate move, US President Barack Obama blocked a wind farm deal involving Chinese firm Ralls Corp, citing national security issues.
Australia, meanwhile, has previously blocked Huawei’s plans to bid for work on its national broadband network.
http://www.bbc.co.uk/news/business-20163907
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The FT says:
Chinese fund in Heathrow airport deal
31.10.2012
……….. (extract) …..
CIC International, a subsidiary of China Investment Corp, is paying £257.4m to Ferrovial for a 5.7% holding in Heathrow Ltd and £192.6m to its other owners for an additional 4.3% of the operator.
The deal comes less than three months after Qatar Holding, the Middle Eastern sovereign wealth fund, reached an agreement with Ferrovial, Britannia Airport Partners and Singapore’s GIC to buy 20 per cent of Heathrow Ltd for £900m.
Heathrow Ltd also owns Stansted, Glasgow, Aberdeen and Southampton airports – although Stansted is in the process of being sold.
The Chinese transaction values the equity of Heathrow Ltd, formerly known as BAA, at the same £4.5bn implied by the Qatari deal.
If both deals are completed – the Qatari purchase is subject to approval by EU competition authorities, but CIC’s is not – Ferrovial’s stake in Heathrow will fall from 49% to 33.7%.
…….. question was now where Ferrovial would invest the proceeds. Options include an offer for Portugal’s state-owned airport operator ANA, or bidding to build and run one of several large US infrastructure projects.
http://www.ft.com/cms/s/0/c1fee6e0-2370-11e2-a46b-00144feabdc0.html
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earlier
Qatar sovereign wealth fund buys 20% stake in BAA leaving Ferrovial 40%
August 22, 2012
Qatar’s sovereign wealth fund is buying 20% of BAA, adding it to a portfolio of British interests including stakes in Harrods, Barclays and J Sainsbury. Ferrovial will sell a 10.6% stake to Qatar Holding. At the same time two more shareholders have sold shares representing 9.4% of the business to the fund, leaving it with a 20% investment in BAA. The total value of the transaction is £900m. Qatar Holding is funded by proceeds from the world’s third largest gas reserves and wants more investment in the UK. This represents further retrenchment by Ferrovial from one of the UK’s most bruising foreign takeovers, although it denied that it is seeking a full exit from BAA. Ferrovial shareholding in BAA will be less than 40% once the Qatar deal is completed, while it owned 55% in 2010. BAA still has almost £11 billion debt. Click here to view full story…