Canadian Borealis Infrastructure (Channel Tunnel rail owner) and German Allianz (insurer of Thames Tideway tunnel) consortium interest in London City Airport
A Canadian pension fund that co-owns the Channel Tunnel rail link has joined forces with the German insurer behind the Thames Tideway Tunnel (super sewer) project to enter the £2 billion bidding war for London City Airport. GIP announced at the start of August that it is selling. Borealis Infrastructure, which manages investments for the Ontario Municipal Employees Retirement System, is understood to have teamed up with Germany’s Allianz to make a consortium approach. They are rivals to buy the airport, including another Canadian investment giant, Ontario Teachers’ Pension Plan (OTPP), which has partnered with the sovereign wealth fund of Kuwait and Hermes to submit an offer for the airport. Australia’s Macquarie is also thought to be considering a consortium bid. Borealis and Allianz are already large investors in British infrastructure, and they have worked together on transactions, including a huge deal to buy RWE’s Czech gas pipeline business and the company that owns German motorway services. Some bankers reckon £2 bn is a top-end valuation for the airport but feasible given the current frothy nature of the market for infrastructure assets.
Channel Tunnel rail link owner and insurer eye City Airport bid
Borealis Infrastructure and Allianz are understood to have joined forces for a swoop on the airport, which has been valued at £2bn
By Ben Martin (Telegraph)
29th Aug 2015
A Canadian pension fund that co-owns the Channel Tunnel rail link has joined forces with the German insurer behind the Thames Tideway Tunnel project to enter the £2 bn bidding war for London City Airport.
Borealis Infrastructure, which manages investments for the Ontario Municipal Employees Retirement System, is understood to have teamed up with Germany’s Allianz to make a consortium approach.
The duo will come up against a host of heavyweight suitors, including another Canadian investment giant, Ontario Teachers’ Pension Plan (OTPP), which has partnered with the sovereign wealth fund of Kuwait and Hermes to submit an offer for the airport. Australia’s Macquarie is also thought to be eyeing a consortium bid.
Infrastructure investors are lining up to swoop on City after Global Infrastructure Partners (GIP), the private equity firm that owns a host of energy and transport assets including Gatwick, announced at the start of the month it wanted to sell the airport. Borealis and Allianz are already important investors in British infrastructure and are viewed as natural suitors for City.
Toronto-based Borealis jointly owns the high-speed rail link between London and the Channel Tunnel with OTPP, and is a shareholder in Associated British Ports.
Allianz, meanwhile, is one of a group of investors that is backing the £4.2 bn Thames Tideway Tunnel, the “super-sewer” project which gained financing approval last week from water regulator Ofwat. Furthermore, Borealis and Allianz have worked together on transactions in the past, including a €1.6 bn (£1.17 bn) deal to buy a RWE’s Czech gas pipeline business in 2013.
The two groups earlier this month partnered with the Abu Dhabi Investment Authority and Munich Re to purchase Tank & Rast, the owner of German motorway services.
City Airport is viewed as something of a trophy asset in the infrastructure world. Located close to both Canary Wharf and the City, it is convenient for workers in the capital’s financial districts and so inevitably carries a high proportion of business travellers.
Some bankers reckon £2 bn is a top-end valuation for the airport but feasible given the current frothy nature of the market for infrastructure assets.
Dermot Desmond, the Irish billionaire businessman, bought City for £23.5 m from construction business Mowlem 20 years ago. He went on to sell it to GIP for about £750 m in 2006.
The airport has enjoyed strong growth, catering for 3.7m passengers last year compared with 2.8m in 2010. However, uncertainty over its mooted £200 m expansion plan could mean that bids fall short of GIP’s asking price.
Boris Johnson , the London mayor, recently blocked the airport’s proposal to boost capacity because of concerns about the increase in aircraft noise. The airport is appealing against his decision and, if it succeeds, City hopes that expansion will allow it to carry 6m passengers a year by 2023.
Spokesmen for Borealis and Allianz declined to comment.
The sovereign wealth fund of Kuwait & Ontario Teachers’ Pension Plan interested in buying London City Airport
The sovereign wealth fund of Kuwait is teaming up with Ontario Teachers’ Pension Plan and Hermes to bid for London City airport, while Macquarie is leading a rival consortium. The airport has been valued at £2 billion. Wren House Infrastructure Management is a massive sovereign wealth fund, one of the world’s largest, owned by the Kuwait Investment Authority (KIA). The KIA is the world’s fifth largest sovereign wealth fund with some $592bn in assets. The current owners of 75% London City Airport, GIP, hired Credit Suisse to handle the sale. Oaktree Capital owns the remaining 25% of the airport, and has agreed to the sale. London-based Wren House was set up in 2013 to facilitate direct infrastructure investment by Kuwait’s sovereign wealth fund. The Ontario Teachers’ Pension Fund already owns Bristol airport (bought Sept 2014 from Macquarie) and holds a stake in Birmingham Airport, as well as other non-airport assets. Despite growth in passengers at London City airports, the sale is likely to be complicated by uncertainty over its £200m planned expansion.
GIP to put London City airport up for sale this year – might raise £2 billion?
London City airport is to be put up for sale by GIP by the end of the year, who want to capitalise on the rising global demand for air travel. GIP owns 75%, with Oaktree Capital owning the remainder, but both have agreed to the sale. GIP also has the main stake in Gatwick airport, and Edinburgh but say they are not selling these now. It is thought the airport might fetch as much as £2bn, which the FT says would be a multiple of over 60 times the company’s EBITDA in 2014. GIP bought the airport for about £750m in 2006 from Dermot Desmond; he had paid £23.5m for it in 1995 from Mowlem. The airport is trying to get planning consent for work to increase the annual number of passengers to 6 million per year by 2023, (4.1 million in 2014) but this has been blocked by Boris, due to noise. London City is appealing against this and may hear the outcome next year. City airport has already been granted permission to increase ATMs from 70,000 to 120,000 per year. It is widely believed that GIP would sell Gatwick soon, after the government makes a decision on if/where there might be a new runway. Last month, GIP said it would be prepared to give a legally binding promise that it will not sell out for a quick profit if the government decides to opt for a runway at Gatwick.