A new moon as Hannover Airport stake sale delivers an industry rarity – a UK investor buying into a foreign airport

The sale of Faraport AG’s 30% stake in Hannover Airport’s operating company Flughafen Hannover Langenhagen GmbH has moved a lot quicker than many had anticipated. The sale, for EUR109.2 million, will contribute around EUR85 million to the group EBIT in 2018 based on current book value, occasioning an impact of around EUR77 million for the group’s 2018 net result. The transaction is expected to be concluded during the next two months.


Summary:

  • Fraport has sold its 30% stake in Hannover Airport for EUR109.2 million in transaction is expected to be concluded during the next two months;
  • This rare opportunity to invest in a German regional airport has delivered a rare solution… a UK investor buying into a foreign airport;
  • The purchaser, iCON, iCON forms part of the UK-based iCON Infrastructure Group, an investment firm specialising in infrastructure investments;
  • This is its first sector investment, but it is unlikely to become a major player and  is one of few UK firms investing in foreign airports at this level.

The Blue Swan Daily reported earlier this month on the rare opportunity the deal provided to invest in a German regional airport. And, rather surprisingly it has delivered an unexpected result… a newcomer to the sector and a industry rarity of a UK business investing in a larger foreign airport.

Fraport’s CEO Dr Stefan Schulte said “Hannover Airport is a solid business with a bright future”, which again prompts the question, “then, why sell it?” He could only say, “For some time, we have received strong interest from the market for Fraport to sell its stake in Hannover Airport.”

The surprising part of the transaction is the emergence of a British investor in a non-UK airport, simply because for some time now there haven’t been very few. iCON forms a part of the UK-based iCON Infrastructure Group, an investment firm specialising in infrastructure investments.

It invests in national infrastructure sector projects focusing on public services such as water and wastewater, electricity, oil and gas networks, contracted and/ or regulated facilities, and social responsibilities; and the transport sector such as rail, toll roads, and ports. The firm has shown a preference for investing in companies based in Europe (initially southern Europe) and North America and it prefers to take a board seat in its portfolio companies.

iCON Infrastructure LLP was founded in 2004 and is based in London’s Mayfair district along with many of its private equity peers, with an additional office in Düsseldorf. According to its website it currently has a diverse portfolio of 21 different companies, across a number of infrastructure sectors.

iCON advised funds currently have in excess of EUR2.5 billion under management following the successful closing of iCON Infrastructure Partners IV, L.P. in June 2017 (EUR1.2 billion). The fully subscribed iCON II and III funds have six and seven investments respectively.

It is evident that many of these investments are in the power and water industries, though there are several port terminals – Zeebrugge in Belgium and the Scheldt Estuary, also Moerdijk/Alphen aan den Rijn in the Netherlands. Amongst its realised assets are two rail carriage- leasing companies; one British and one German/Danish.

iCON appears to have had no prior airport investments though. The features and benefits that may have attracted it to Hannover were chronicled in the previous article (see left). Does this signal a deliberate move into the sector? Will it be the next Macquarie or GIP? Probably not. iCON presents itself as a cautious investor which sticks religiously with those sectors it knows well and only breaks the cycle when it sees the main chance.

But at least it is a UK investor into foreign UK airports, a dying breed, even if through a foreign subsidiary. This is something that is known to have taxed the UK government although it cannot really do much about it. Throughout the 1990s and 2000s large organisations like BAA plc, Manchester Airport, and TBI were major investors in foreign airports. At a lower level, Churchill Airports, National Express Group and Omniport kept the flag flying.

But the pot of gold that (mainly secondary) airports appeared to be at that time dropped off the end of the rainbow. Other investors such as Bridgepoint, Peel Airports, and Regional and City Airports (Rigby Group), which are or were content to take on UK airports, have steered well clear of what lies beyond the White Cliffs of Dover.

The CAPA Airport Investors Database suggests there are a mere handful of regular UK-based investors in foreign airports and none of them are operators per se, though they may take a Board seat. They include Wren House, which is part of the Kuwait Investment Authority anyway. The two largest are the Children’s Investment Fund, a hedge fund which came out of nowhere in Feb-2015 to take a stake in Spain’s giant operator AENA, and Utilico, one of the largest investors of all through its selective investments via the Emerging Markets Trust closed-end investment vehicle in Malaysia and China.

That there are no UK operators with foreign ambitions is quite staggering, but most of them are foreign-owned anyway. At least the investment sector is keeping its end up.

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