Stobart Group unexpected buyer of London Southend Airport from Regional Airports Ltd for GBP21 mill
At one stage London City Airport, owned by Global Infrastructure Partners (GIP), a consortium of GE and Credit Suisse, had seemed favourite to acquire Southend Airport, some 50 miles to the east of the capital in Essex. Once the base of British Island Airways, it handled up to 700,000 passengers annually in its heyday,but had been unable to raise passenger throughput much above 200,000. The vendor, Regional Airports, has this year made it clear it preferred to focus its efforts on the general aviation Biggin Hill Airport in southeast London, expanding it to attract more business jet flights and possibly commercial airlines in the future.
But London City's owners have since been distracted by London Gatwick Airport becoming available. They might have had it in mind to build up charter flights at Southend.
While London City was in the running the transaction value was assessed at up to GBP55 million. The EBITDA multiple on the final price, GBP21 million, cannot be determined, as Regional Airports declined to provide any earnings figures.
To be funded by a share issue and borrowings
Stobart Group is reportedly planning to raise GBP10 million of the initial GBP16 million payment for the airport from a share issue. The remaining GBP6 million will be raised from borrowings. Andrew Tinker, the Group CEO, stated, "acquisition of Southend Airport is a major opportunity for Stobart to advance the implementation of its multimodal strategy. At one stroke, we have found our southern base and greatly enhanced our position as a leading point-to-point service provider for customers in the UK and Europe who require fast and efficient services by air as part of their logistics solutions."
Undoubtedly the best known transport brand in Britain
When Mr Tinker speaks of a multimodal strategy, he refers to a group that has in recent years grown from being a truck operator (undoubtedly the best known in Britain) to a pan-sector conglomerate of 5,300 employees with interests in ports, rail and airports.
Until the Southend deal, Stobart's only airport was at Carlisle on the English/Scottish border, the city that is the base of the road haulage empire. Stobart acquired the lease from Haughey Airports in Apr-07, and had an option to purchase it from Carlisle Airport, which was extended for six months in Jul-08 for a consideration of GBP50,000, subject to Carlisle Airport seeking alternative methods of securing planning permission for the Stobart operations within that period. The UK Secretary of State had 'called-in' the planning application on 18-Jun-08 deeming the decision to be of 'greater than local importance'. In March this year, Stobart proposed to enter into an option to acquire Carlisle Airport for the consideration of up to GBP15 million (GBP2.5m in cash and GBP12.5m in shares).
Carlisle City Council is protective of the environment (the airport is situated in Green Belt land to the east of the city) and has not been entirely supportive of Stobart's efforts to build up business aviation and possibly commercial services as well as the logistics business on 460 acres of land.
The Stobart Board believes that the Carlisle acquisition would offer the Group the potential to develop passenger aviation activities and provide customers with opportunities for airfreight facilities in the future. Even so, the deal was looking questionable before the introduction of Carlisle into the equation, presenting the company with a north-south hub development opportunity.
Comprehensive transport facilities at either end of the country
With both Carlisle and Southend airports in its network, Stobart has access to motorway or A-road linked facilities at either end of the country, railheads and ports at Felixstowe, Suffolk and various locations within striking distance of Carlisle Airport, as well as its own container handling port Mersey Gateway, at Widnes in northwest England.
Stobart has already started to talk to airlines about commencing services at Southend but has no experience yet of commercial passenger operations.
Where next for Stobart?
Its next move may be to attempt to acquire Humberside Airport in eastern England from Manchester Airports Group, positioned roughly mid way between Stobart's other two.
To do so would allow Stobart to gain access to another multi-modal operation, as Humberside, also well served by a motorway, is the home to the ports of Hull, Immingham and Grimsby, collectively the UK's largest. Grimsby has acquired the reputation of being Europe's 'food city' in view of the huge frozen food business there (it claims more pizzas are made there than in the whole of Italy).
Small though it is, Humberside is considerably larger than both Southend and Carlisle, and has established passenger services, so that might make it a little too daunting for Stobart Group just now.
Stobart is just one of several European trucking companies said to be investigating expansion of aviation-related facilities.