Researched and produced by leading CAPA Analysts and backed by industry data, the report lists airports and airport groups which could be attractive to investors and identifies other airports that may be a target for mergers or acquisitions. The report features a case study on the move from Hungarian government to enact a sort of partial reverse privatisation by acquiring the equity of the majority shareholder, AviAlliance, in Budapest Ferenc Liszt International Airport. Finally, the report concludes with pinpointing the operators and investors to watch, based partly on their participation in the sector already and partly on their level of activity before the pandemic.
Report Length: 71 Pages
For evident reasons the last 18 months have been the quietest known for airport M&A transactions since the early 1990s. While some that were already in train did continue, for example in Brazil (with hardly any delays to the concession programme there), and in Japan (with some, but not for long), and some long-standing others like the Sofia concession were completed, new opportunities for investors have been very hard to find.
Investors with a penchant for airports couldn’t be blamed for walking away from a business where the ultimate customer base – the passenger – collapsed by up to 99% along with most of the auxiliary revenue streams, where uncertainty abounds, and where its future prospects are at the whim of ultra cautious governments, many of which may use the ‘opportunity’ presented by the pandemic to ‘reset’ aviation within the context of a rapidly carbon-free future. Aviation will not
be carbon-free ‘rapidly’ or even for a long time, which classifies it as a dinosaur to many of those in power. Then, out of the blue, a tentative but unsolicited bid emerged by a consortium of investors to buy Sydney’s Kingsford Smith International Airport, which is listed on the stock exchange.
That consortium’s bid essentially hangs on: continuing ‘local’ ownership and retained management; investment experience; the promise of improved operational and financial performance; and a commitment to ‘green’ ideals and targets.
Section 1 – Review of listed airports/groups which could be attractive to investors
Those credentials are likely to become the norm as deals begin to reappear – and especially the last one.
This bid, a rare one for a publicly listed company and similar to the one for BAA plc in 2006, also raises the question of whether other wholly or partially floated airport companies, most of them dating from the 1990s, might also become hostile investor targets.
The majority of them have since established themselves as multi-ownership companies in which the public float has reduced and sometimes considerably so. Additionally, there are still occasionally investment level caps preventing single entity equity investment beyond, say, 5% or 10%. So opportunities will be rare.
But it can be done, as the case of Vienna Airport proves, where an Australian fund, the lead member of the Sydney consortium as it happens, ate into the free float in two tranches, leaving itself in a close-to-controlling position.
There is a wide range of airports that are publicly or privately owned, or with no stock market float component, or where there has been, and even where there actually is but the government remains firmly at the helm of strategic development, that could also become targets for investors in the coming months and years.
Section 2 – Other airports that might be M&A targets
Section 2 of the report reviews some of the more likely candidates, including Berlin, where the new airport began life long ago as a private-sector enterprise before a crippling public-sector construction debacle set in, and where the private sector might yet be required to fly to the rescue of an entity that had the misfortune to open nine years late – in the middle of the pandemic.
It examines the prospects for greater competition between airports in the US – and even within cities there, where public private-partnership development is becoming commonplace, despite the failure of a 25-year privatisation scheme designed to lease airports out wholly – and in Canada, which retains its unique ‘not for profit, stakeholder’ ownership system.
Section 3 – Budapest Ferenc Liszt International Airport
Section 3 of the report looks inter alia at a move by the Hungarian government to enact a sort of partial reverse privatisation by acquiring the equity of the majority shareholder, AviAlliance, in Budapest Ferenc Liszt International Airport.
While such state grabs are rare, they do happen. One of them, in Bolivia, helped end the participation of the Spanish company Abertis in the sector as well as causing international friction, and there have been several other examples of national government interference in airport ownership in Europe.
The government’s decision in Hungary is driven by politics and raises questions about future ownership of airports and state protectionism across Eastern Europe as not only Hungary, but also several other countries in the region, could well leave the European Union in the following years.
Section 4 – Who are the buyers and concessionaires?
Finally, the report looks at which might be the operators and investors to watch in the future, based partly on their participation in the sector already, and partly on their level of activity before the pandemic.
Inevitably much of that renewed activity will likely arise from a small group (20 of them are examined here) which have a track record in the sector, and it is interesting to note how so many of them were chasing the same deals up to Jan-2020.
There are many other investors and potential new ones, and throughout the text reference is frequently made to various CAPA databases (Global Airport Investors; Airport Construction and Cap Ex; and a shortly forthcoming one on the major airports and airports groups in FY2020 as measured by revenues and other metrics), which will enable professionals in the industry better to understand this complex segment of it.
CAPA – Centre for Aviation Managing Director, Derek Sadubin said:
“Airport transactions for the most part have ground to a halt as the pandemic bites. But as we begin to see some light at the end of the tunnel, opportunities across the sector are beginning to re-emerge. This new CAPA report supports investors, financers, government and infrastructure planning departments to look beyond just the next few weeks or months ahead and take the first step towards identifying real opportunities for the future.”
The impacts of the global pandemic have meant the last 18 months have been the quietest for airport merger and acquisition transactions since the early 1990s. While some that were already in the works did continue, for example in Brazil and Japan, new opportunities for investors have been very hard to find.
Investors with a penchant for airports couldn’t be blamed for walking away from a business where the ultimate customer base – the passenger – collapsed by up to 99% along with most of the auxiliary revenue streams. Nevertheless, after a lengthy period with little activity in the airports sector, prospects in the future look bright and a few key bids may just pave the way for more to come.
The new CAPA Airport Mergers & Acquisition Opportunities for 2H2021 and Beyond is available now for USD795.
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