Ferrovial to sell its 25% stake in Heathrow for $3 billion to Ardian (15%) and Saudi Arabia’s PIF (10%)

Infrastructure giant Ferrovial has reached an agreement with two different buyers to sell its entire 25% stake in Britain’s busiest airport, Heathrow, for £2.37 billion  ($3.01 billion) the company said in a statement on Tuesday.  Ferrovial said the buyers for the stake in FGP Topco – the parent company of Heathrow Airport Holdings Ltd – were private equity fund Ardian and Saudi Arabia’s Public Investment Fund (PIF) . Ardian would acquire a 15% stake and PIF a 10% stake.  The transaction is subject to regulatory conditions and must comply with the right of first offer and full tag-along rights, which may be exercised by the other FGP Topco shareholders, Ferrovial added.  Ferrovial expects to complete the sale by mid-2024. Ferrovial also has a 50% stake in three other British hubs: Aberdeen, Glasgow and Southampton. It also has a 49% stake in the new Terminal One at New York City’s JFK airport.
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Ferrovial to sell its 25% stake in London’s Heathrow for $3 billion

By Reuters
November 29, 2023

MADRID, Nov 28 (Reuters) – Infrastructure giant Ferrovial (FERF.AS) has reached an agreement with two different buyers to sell its entire 25% stake in Britain’s busiest airport, Heathrow, for 2.37 billion pounds ($3.01 billion) the company said in a statement on Tuesday.

Ferrovial (FERF.AS) said the buyers for the stake in FGP Topco – the parent company of Heathrow Airport Holdings Ltd – were private equity fund Ardian and Saudi Arabia’s Public Investment Fund (PIF). Ardian would acquire a 15% stake and PIF a 10% stake.

The transaction is subject to regulatory conditions and must comply with the right of first offer and full tag-along rights, which may be exercised by the other FGP Topco shareholders, Ferrovial added.

Ferrovial expects to complete the sale by mid-2024, according to a person familiar with the operation.

The Spanish group bought an indirect stake of 55.87% in Heathrow Airport Holdings in 2006. It sold 10.6% to Qatar Holding in 2012 and eventually reduced its stake to 25% in 2013.

In August 2022, three people familiar with the talks told Reuters about interest in Ferrovial’s stake from Ardian, which discussed a possible joint proposal with PIF with its own advisers.

Earlier this month, Ferrovial said that operations at Heathrow remained positive, receiving 59.4 million passengers in the first nine months of this year, up 34.4% from 2022. Passenger traffic in September exceeded pre-pandemic levels for the first time.

But the company also warned that British aviation regulator CAA’s decision telling Ferrovial to cut the fees it charges airlines for the period between 2024 and 2026 would hit investments.

The group said it remained fully committed to continuing to invest in the airport business. Ferrovial also has a 50% stake in three other British hubs: Aberdeen, Glasgow and Southampton.

The company, which seeks to be listed in the United States stock market early next year, has a 49% stake in the new Terminal One at New York City’s JFK airport.

($1 = 0.7876 pounds)

https://www.reuters.com/markets/deals/ferrovial-sell-its-25-stake-londons-heathrow-3-billion-2023-11-28/

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See also:

Heathrow/infrastructure investment: Ferrovial departure looks well timed

1.12.2023  (FT)

See full article at

https://www.ft.com/content/1d3e1e52-f553-4e5b-8fb4-d1609c1d7aa6

Sellers of infrastructure assets can extract high prices from bidders. One reason is that motorways, airports, pipelines and the like usually have long-term, steady cash flows, often with an element of inflation protection, and buyers can load up their investment with debt. Adding debt amplifies investment returns and losses. Perhaps Ardian, the private equity house that is buying part of Ferrovial’s stake in Heathrow airport alongside Saudi Arabia’s Public Investment Fund, plans to do the same. Without an added slug of debt, it is not easy to see how it might make the mid-teen returns on equity that it usually targets on infrastructure projects.  Ardian and PIF are paying a healthy £2.4bn for Ferrovial’s 25 per cent of Heathrow. Other shareholders, which include the Qatar Investment Authority, Caisse de dépôt et placement du Québec and Singapore’s sovereign wealth fund GIC, can choose to keep their holdings, buy Ferrovial’s shares, or tag along and sell into the bid. The bid implies an equity value of £9.5bn. Add in the year-end net debt, which Mediobanca Research pencils in at £16.3bn, and the enterprise value is just shy of £26bn. That is a near-30 per cent premium to Heathrow’s regulated asset base. This will reflect the accumulation of the net value of investment that its owners have made into Heathrow. That price is also about 13 times next year’s projected earnings before interest, tax, depreciation and amortisation (ebitda), expected to be lower than this year given the cut in regulated landing fees. Listed competitors travel at around 10 times. Vinci, the French infrastructure and construction group, which bought 50.1 per cent of Gatwick in 2018, paid more. But that was for a pre-pandemic majority purchase. Ardian and PIF might end up stuck at 25 per cent. Ardian will need to sweat the asset to achieve mid-teen investment returns. Assume, for the sake of argument, that over the next decade Heathrow increases its ebitda by 3 per cent a year and cuts interest costs gradually. Hold annual capital spending and tax steady at £800mn to £900mn. If Ardian then sold out at 12 times ebitda, it could achieve an annualised rate of return in the high single digits. True, this might well creep into the double digits should the new investors leverage their own investment. And there may be room to nudge up Heathrow’s cash flows. Analysis by Citigroup suggests that it underperforms on retail revenues compared with Zurich and ADP. Lastly, none of these rough-and-ready numbers factors in the — increasingly remote — prospect of a third runway. Nevertheless, at this point, Ferrovial has extracted a good price for its holding.

https://www.ft.com/content/1d3e1e52-f553-4e5b-8fb4-d1609c1d7aa6


See earlier:

Heathrow owner Ferrovial (25%) probably keen to sell its stake

The Heathrow owner with the largest share (25%), Ferrovial, has opened the door to selling its stake, as it is unclear if it will ever be able to build a 3rd runway.  A top executive at Spanish infrastructure giant Ferrovial said it would look at the merits of bidders if there are offers. It is likely that buyers are being informally sounded out about buying the 25% stake.  Recently the regulator, the CAA, ruled that Heathrow will have to cut its passenger charge from £31.57 to £25.43 next year, so the airport will be less profitable.  One exit option could be for Ferrovial to sell up to one of its fellow shareholders. Heathrow has proved a lucrative investment for its shareholders, giving them £4 billion in dividends between 2012 and 2020.  Though in 2020 the Supreme Court gave permission a 3rd runway, Heathrow got rid of its expansion team, and would have to do a lot of work to reinstate the now outdated plans – against fierce opposition.

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