Peel Holdings to sell airports (Liverpool, Doncaster and Durham Tees Valley) to fund purchase of ports company?
An article in the Mail on Sunday (UK) suggests that the UK’s Peel Holdings, a
private company, intends to sell a majority stake in its airports division to
help fund the GBP800 million acquisition of Forth Ports, one of Britain’s biggest
port operators. How have airports become of lesser significance than ports?
developer, headquartered a stone’s throw from Old Trafford, the home of soccer
club Manchester United, has spent the last ten years building up a mini empire
of three secondary level airports and a general aviation facility, two of which
are in direct competition with the primary level Manchester Airport. In the main
they are kept going by low cost airlines. At Liverpool, over 90% of the passenger
traffic is attributed to Ryanair and easyJet operations.
Coventry in the English Midlands, closed down last year and others are known to
Peel’s Liverpool Airport has failed to make a profit under its ownership, but
it also failed to do so under any ownership model in its 75-year history. Peel
found that investing to replace totally inadequate infrastructure was very expensive
when the primary source of income, from aeronautical revenues, is so hard to maximise
when your client base is ‘low cost’. It isn’t the only airport operator finding
that out the hard away.
region, or Durham Tees Valley Airport, situated in what is left of Britain’s heavy
manufacturing industry – which doesn’t amount to much.
the European Union Objective 1 and 1A regional aid schemes that support economically
retarded areas. All the airports were in these areas.That money has now all but
in its airports, and almost a year ago sought the assistance of Rothschild’s Manchester
office to help them find it. More recently, Canada’s YVRAS, an autonomous division
of Vancouver Airport that is now 50% owned by Citi Infrastructure Fund and which
has bid for both Chicago’s Midway Airport (lease) and London Gatwick Airport (sale)
during the last 12 months, was posited as a potential suitor. Now it seems that
a majority stake is for sale.
for the airports in their entirety. My opinion was sought and I proposed that
£50 million to £100 million was more likely. Others offered £300 million, so it
looks as if the journalist went down the middle. It is not easy to value these
assets. There is no positive Ebitda on which to base any earnings multiple valuation.
It also depends if Peel wants to sell the land within the airport boundaries that
are not used for aeronautical purposes and there is some value here. For example
at Doncaster – a big ex-military airfield – the council is building an aerospace
business park and at Durham a cargo village will be completed when the airport
actually gets some cargo flights. And the Liverpool Airport car park, once run
by NCP but now by the airport, is probably a money spinner.
three years ago that Leeds Bradford Airport (a direct competitor to Doncaster-Sheffield)
was sold by local councils to private equity house Bridgepoint for GBP145 million,
at an earnings multiple of 30 x. When the much bigger Gatwick Airport (by factor
of > 10) was sold last year, that multiple was down to 12, as it was for recent
deals in Australia. London City Airport, with < 3 million passengers annually,
was sold for GBP750 million a few years back. The same company that (partly) bought
it, GIP, recently bought Gatwick for GBP1.5 billion – an airport twice as expensive
but over ten times bigger. If asset valuation is to be used as the yardstick,
well, firstly, which assets exactly (re. the land issue)? Gatwick was sold at
a discount of 13% to its Regulatory Asset Base valuation (the RAB being a measure
the UK CAA uses and which basically means the regulated bits of the airport –
the runway(s) and terminal(s). The same calculation can’t really be applied truly
at Peel’s airports because they aren’t regulated but if it was, and Peel’s airport
assets are said to be GBP119 million, then we’d have a sale price in the order
of GBP103 million.
at least for many years, and particularly in the UK. I’m not sure what YVRAS sees
in these airports although the organisation is reputed to have good skills at
turning poorly performing airports around. There is still some growth potential
at Doncaster Sheffield, though competition from nearby airports (which means very
close by in the UK) is tough and growing. Durham may be a basket case. I hope
not. Liverpool has done most of its growing in the budget segment already and
needs to build up quickly in the legacy segment. And it will face a renewed challenge
from the primary airport, Manchester, soon, when a new CEO is appointed. Manchester
has been sleeping as far as business development is concerned.
to these companies? Peel is a property developer (it runs a ridiculously ostentatious
shopping mall on the outskirts of Manchester and has grand plans for huge waterside
developments throughout the northwest of England). It also has ownership of the
Port of Liverpool and the Manchester Ship Canal Company so it is not new to this
sector – one that has been doing very nicely these last few years. Well, better
than airports, anyway. The airports business has witnessed the mass exit of companies
that were not directly related to it before now – for example the bus operators
of the late 1990s. Is Peel’s decision one on its own, or will other companies
now follow suit; airports patently not being the cash cows they thought they would
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is trying to sell its air operations in a bid to expand its port business. The
Northern Echo reported at the beginning of February that talks were ongoing between
Vancouver Airport Services and Peel, over a stake in the business. Peel again
refused to confirm or deny that negotiations had taken place, although Peel Group
added that it was looking for a co-investor for the airport groups. It was learnt
that Peel was part of the Northstream consortium that bid £612 million for Forth
Ports, on March 5. It was speculated on March 8, 2010 that a higher bid of £800
million would be put in and that Peel was looking to sell a majority stake in
its airports, which could raise £200 million, to help fund this. Peel said, "Any
speculation that the Peel Airports Group, or any of the Group Airports, has been
sold or is for sale is wrong." Peel added, "Peel Holdings confirmed several months
ago that, at the appropriate time, it would consider the introduction of a co-investor
into Peel Airports to provide further capital for the development and expansion
of the airports group. This remains the case." Apart from the Durham Tees Valley,
Peel Airports runs Liverpool Airport PLC and Robin Hood Airport.
in Peel Airports Limited that could help fund its £800 million bid for Forth Ports.
The report added that the firm is in talks with Vancouver Airport Services (VAS)
to sell Peel Airports. These comprise Liverpool Airport PLC, Robin Hood Doncaster
Sheffield, Durham Tees Valley and City Airport Manchester. A sale of the division
could raise up to £200 million. It was reported that a Peel spokesman declined
to comment on talks, but confirmed the firm would like to sell part of Peel Airports.
VAS declined to comment on the Peel talks. Peel is looking to sell off non-core
parts of the business after seeing millions of pounds wiped off the value of its
assets as a result of the recession.
Services and Peel Holdings, which operates Durham Tees Valley Airport (DTVA),
asked last night, but a spokesman reiterated the firm’s desire to sell part of
its airport business, Peel Airports.
by Vancouver Airport Services, a firm he said was "wellrespected in the industry".
world, serving a combined 30 million passengers annually.
Mr Bentley, joint managing director of consultancy Big Pond Aviation.
for the North-East if they are involved in a deal," he added.
John Lennon airports.
300 European airports after figures revealed that passenger numbers had halved
within a year. Airlines bmi, Flyglobespan, Thomson and Ryanair all axed routes
from the airport last year.
has reached the end of the line."
body scanners that produce a naked image of passengers.
(AIT), which Gordon Brown has insisted is vital to defeat terrorists.
explosives hidden on a passenger’s body, after the Christmas Day attempted bombing
on a flight to Detroit, in the US.
them before the summer holiday season, stating they must be in place "in the coming
need to have several. So far, the Dft has only "encouraged" airports to adopt
the scanners, although it has the power to order them into line, if necessary.
the scanners to be introduced.
and so are unable to comment as to whether Durham Tees Valley Airport will see
such machines being installed."
but added: "We will work with them on whatever measures are deemed necessary."