Why Europe’s Airport Sector is Poised for an M&A Boom

By Michael Dunning

Infrastructure deals in the European airports sector have been few and far between in the last 18 months. Other than Global Infrastructure Partners’ (GIP) GBP1.5bn acquisition of the UK’s Gatwick Airport at the end of 2009 and a couple of disposals by Ferrovial – including a 65% shareholding in Naples Airport – there have been slim pickings for infrastructure investors. But that is all about to change. In fact, there are set to be more deals in the next 12 to 24 months than at any time in the last five years. There are a number of reasons for that.

The first is that countries most adversely affected by the sovereign debt crisis in the eurozone urgently require funds and have been told to privatise state assets – including airports – in order to raise those funds. A second reason is that current private owners of airports are being forced to sell their assets, either by their regulators or shareholders. Third, there are a number of potentially distressed situations in the European airports sector that could require additional equity to delever overgeared capital structures.

“There are portfolios that are owned by corporates or governments that need to recycle the capital invested in these relatively high capital expenditure assets,” explains Macquarie’s head of infrastructure advisory, Daniel Wong.

“There are also individual airports coming out of these portfolios, such as Madrid or Barcelona, or Stansted. There are also stakes in airports on offer. And there is also the refinancing market for airports, which is a constant.”

Managing Risk at Stansted Airport
One of the highest-profile deals due in the next few months is Ferrovial-owned BAA’s forced sale of Stansted Airport in the UK for regulatory reasons. The country’s Competition Commission (CC) issued its final report recently, which confirmed that BAA must sell Stansted and either Edinburgh or Glasgow airport. The sale process is expected to begin within the next three months, with Stansted the first to be put on the block.

The competition for Stansted, however, is not expected to involve as many groups as Glasgow or Edinburgh airports because of the airport’s risk profile and its exposure to low cost carriers Ryanair and easyJet.

“It will be investors who have been in and around the aviation space for a while and feel confident in assessing that risk. The people who will look at it are those that want to make something of the asset,” says Wong’s Macquarie colleague and airports expert Sam Newman. “You might get someone who is an existing airport operator and can manage the Ryanair and easyJet relationships.”

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