French firm Vinci takes majority stake in Gatwick Airport with £2.9bn acquisition

Passengers walk through the South Terminal building at Gatwick Airport, France's Vinci has taken majority stake in Gatwick with £2.9bn acquisition. Reuters.

France's Vinci agreed to acquire control in Gatwick Airport for 2.9 billion pounds (Dh13.45bn) as the French construction company jumped on the chance to add a major London hub to its aviation portfolio.

The purchase of the 50.01 per cent stake in London’s second-busiest airport from a group of investors including sovereign wealth funds from Abu Dhabi and Australia will be completed in the first half of 2019, Vinci said Thursday. Existing shareholder Global Infrastructure Partners will manage the remaining holding.

With 45.7 million passengers in 2018, Gatwick will become the largest single airport in the French company's global network. Gatwick has been under pressure due to intensifying competition from London’s other airports and lost out to Heathrow, Europe’s busiest hub, in a contest to win government backing for the construction of a new runway. Its operations descended into chaos just before Christmas after drones were spotted around the runway led to a prolonged shutdown.

The 120-year-old engineering company is shrugging off risks surrounding Britain’s looming exit from the European Union, as rival airports warn demand for air-travel could be dented. Manchester Airports Group, operator of rival London hub Stansted, sees the current Brexit plan trimming passenger numbers over the next five years but doesn’t expect it to halt growth entirely. Like Stansted, Gatwick is targeting more long-haul flights.

“Airports are attractive investments, especially in a world of high volatility, because airport returns can be quite predictable and manageable even if passenger numbers are volatile,” Bernstein analyst Daniel Roeska said. “In any Brexit scenario, people will still go on holiday. In the long term it won’t be impacted that much on the leisure side.”

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Gatwick has outlined 1.11bn pounds in investment plans to expand the capacity of its two terminals in the next five years. It’s already the world’s busiest single-runway hub, the biggest base for discount carrier EasyJet and the focus for long-haul leisure flights at British Airways.

The sale values Gatwick at 19 times 2019 earnings before interest, taxes, depreciation and amortization and can be considered low, Vinci airports head Nicolas Notebaert said on a call with journalists. Brexit risks were factored into the price, he said.

While the price is broadly in line with recent deals in the industry, it’s on the pricey end given the uncertainty around Brexit, according to Vittorio Carelli, an analyst at Grupo Santander.

“I would have preferred to see a multiple closer to 17 or 18 times,” said Mr Carelli. Gatwick’s plan to put its standby runway in full operation may increase the number of passengers the airport can service, he said.

Global Infrastructure Partners, which manages more than $40bn in assets from ports and airports to a vast wind farm in the North Sea, bought London’s second-busiest airport with the consortium of investors in 2009 for about 1.5bn pounds. Gatwick reported earnings of 411.2 million pounds in the fiscal year through March, on revenue of 764.2m pounds.

Vinci manages about 35 airports, in countries including Japan, Brazil, France and Cambodia. The company also operates toll roads and a construction business. Its shares have fallen 17 per cent this year, valuing Vinci at 42.1bn euros ($47.9bn).