French government’s share sale in Groupe ADP is attracting the industry’s big hitters

The French government, as part of its PACTE Bill on growth and economic transformation, intends to divest its (50.6%) stake in Groupe ADP, the operator of the Paris airports and, directly or indirectly, 35 other airports across the globe. However, there is a catch. The asset sale will be accompanied by measures permitting the state to recover all previously held airport infrastructure and assets represented in its controlling stake after a 70-year period.


Summary:

  • The French government intends to dispose of its 50% stake in Groupe ADP, which operates the Paris airports;
  • One of the world’s leading airport investors – France’s Vinci – is already in the frame, along with US/UK and Australian funds managers;
  • There will be more – this is a prime investment opportunity though there is an ownership caveat.

This is not the first privatisation of what was Aéroports de Paris (AdP) before it became Groupe ADP, with Paris Aéroport retained as a brand name for the Parisian airports in the group. In 2005 AdP became a public company, and in Jun-2006 there was an IPO which raised USD1.58 billion, although the French government retained a majority of the company’s shares (then 67.2%).

In 2008, AdP and Schiphol Group, which runs Amsterdam Schiphol Airport, signed a strategic partnership that involved a cross-shareholding of 8% in each other’s companies. Then in 2008, French conglomerate Vinci also bought 3.3% of AdP, describing the airport operator “the heart of its strategic aims” and subsequently raised it.

Vinci has reflected recently on a desire to gain a larger stake in Groupe ADP. So it is of no surprise that Vinci Airports, a Paris-based French company, is one of three firms that are in the frame now to submit bids to acquire this new stake in Groupe ADP, along with Global Infrastructure Partners and Industry Funds Management.

Since stepping back from airport investment and management for a while over a decade ago, Vinci has returned to become one of the largest private companies operating in the sector. Initially, its representation within France itself, apart from the AdP/GDP stake, was low-key via a series of management contracts at small secondary and even tertiary level airports. Latterly, it has grown to include Lyon’s St Exupéry and Bron airports (60% holding with France’s Caisse des Dépôts et Consignations), and Vinci can be expected to bid in forthcoming Marseille and Bordeaux privatisations.

Outside France, Vinci has extensive airport interests in Portugal, also elsewhere in Europe, in North America, the Caribbean, Latin America (Brazil and Chile), historical ones in Cambodia (three airports), and in Japan (Osaka) by way of concession, acquisition or wholesale takeover of operators. In total it is involved with 47 airports globally but seeks the gravitas associated with the Paris airports.

MAP – The interested parties: Vinci AirportsSource: CAPA – Centre for Aviation

There was a time when Global Infrastructure Partners (GIP), which manages pan-sector investment funds out of New York and London collectively valued at over USD40 billion, looked as if would become involved in the airport sector to a similar degree. At its zenith it had London Gatwick, London City and Edinburgh airports in its portfolio. Then, London City was sold – at a healthy profit – in Feb-2016 and its shareholding in London Gatwick has reduced to 42%. Rumours persist that either or both of Edinburgh Airport, which has grown quickly, and the Gatwick equity will be sold – wholly or partially – when the time is right.

Nevertheless, GIP frequently turns up as an interested party when privatisations or equity sales are announced and it has been linked during the last two years with Mumbai Airport and, more relevantly, with the Lyon and Nice airports in France.

MAP – The interested parties: Global Infrastructure Partners (GIP)Source: CAPA – Centre for Aviation

The outlier here is Industry Funds Management (IFM), an Australian funds manager with AUD39 billion (USD28.7 billion) under management. IFM restricted its activities to airports in Australia until Sep-2012 when it took a 35% stake in Manchester Airports Group (MAG) which was contingent upon, and subsequent to, MAG’s acquisition of London Stansted Airport, which was then in the ‘race’ for additional runway capacity in Southeast England.

Rather than retrench and withdraw from Europe when Stansted’s runway bid was overlooked, as Australasian peers Macquarie Airports and Infratil have done previously, IFM has since gone on to acquire a substantial stake in Vienna Airport and then further afield in Mexico City’s Toluca Airport by way of its acquisition of Spanish infrastructure concessions firm OHL Concessions.

Currently it has interests in 13 airports and its list of pitches grows longer, too. IFM has bid for leases in Japan (the Osaka airports), in Italy (F2i Aeroporti), and in Chicago (its bid for the Chicago Midway lease was with MAG, before it took a stake in that UK entity). It has also expressed an interest in operating the new Western Sydney Airport but only “after the construction is complete and after the traffic starts and settles, should the government want to offer a long-term lease”. Again, more relevantly, IFM was a bidder for the Lyon and Nice airports.

MAP – The interested parties: Industry Funds Management (IFM)Source: CAPA – Centre for Aviation

So the big guns are lining up but this is only the start. One can realistically expect interest in the Paris airports to be shown by TAV (in which Groupe ADP holds a 38% share), Fraport and many others. After all, this is one of the few really big ticket transactions that will take place in the foreseeable future.