Heathrow owner Ferrovial studies options for stake in UK's biggest airport

Spanish company has been invested in the London airport for 16 years and ranks as its single largest investor

Heathrow was hard hit by coronavirus lockdowns, but has raised its 2022 traffic forecast to 54.4 million passengers. Reuters
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Spain's Ferrovial is looking at options for its 25 per cent stake in London's Heathrow, two sources told Reuters, and has held preliminary talks with external advisers on the future of its holding in Britain's biggest airport.

The early stage discussions come amid interest in Ferrovial's stake from private equity firm Ardian, which has held talks with its own advisers on a possible joint proposal with Saudi Arabia's Public Investment Fund (PIF), these sources and another person familiar with the matter said.

Ferrovial has yet to take a final decision and the discussions may not result in a sale, all the sources said.

Shares in the Madrid-listed firm rose as much as 4.2 per cent on the Reuters report. At market close, they were up 3.7 per cent, scoring their second best day in five months and making them the third best performing stock across the pan-European STOXX 600 index.

Ferrovial and Ardian both declined to comment, while PIF did not immediately respond to a request for comment.

Heathrow is worth about €24.3 billion ($25 billion), including debt, JP Morgan analysts calculated in May. By JPMorgan's estimates, Ferrovial's Heathrow holding has an equity value of €611 million.

But Insight Investment Research analyst Robert Crimes had a less conservative approach and told Reuters the equity value of Ferrovial's 25 per cent stake in Heathrow could be close to €2 billion, well above analysts' consensus. He said Ferrovial's stock has yet to reflect the post-pandemic recovery in traffic volumes and inflation-linked returns.

Heathrow, which Aviation data firm OAG said was the world's fifth busiest airport in July, was hard hit by coronavirus lockdowns, but raised its 2022 traffic forecast to 54.4 million passengers in June after a travel rebound.

Last month Heathrow, like some other airports in Europe, asked airlines to stop selling tickets for summer departures. It also capped passenger numbers to limit queues, baggage delays and cancellations, as it struggled with pent-up demand.

Madrid-based Ferrovial, which controls Spanish transport infrastructure developer Cintra and has stakes in motorways in the United States and Canada, has been invested in Heathrow Airport for 16 years and ranks as its single largest investor.

Qatar Investment Authority (QIA), which has a 20 per cent stake in Heathrow, is the second biggest investor in the busy British airport, while Caisse de depot et placement du Quebec (CDPQ), Singapore's wealth fund GIC and China Investment Corporation also have sizeable holdings.

QIA declined to comment while CDPQ, GIC and China Investment Corporation were not immediately available.

A separate source who worked on the 2006 acquisition of Ferrovial's Heathrow holding said that while the Spanish firm's board had frequently reviewed its strategy over the years, it had never reached a consensus over selling the stake.

This source said Ardian made an initial approach for the Heathrow stake last year, but discussions did not advance.

Ferrovial appointed aviation veteran Luke Bugeja to run its airports business last year, which one of the sources said could accelerate a review of Heathrow.

After a series of losses, Ferrovial pointed last week to a recovery in the airport business, thanks to an easing of restrictions as it posted a profit.

It also bet further on the industry in June with a deal to buy a stake in the consortium that will build and operate a new terminal at New York's JFK International Airport.

But its Heathrow experience has been difficult and the chief financial officer of its airports business, Ignacio Castejon, said during last year's third-quarter earnings he was “very sceptical” about contributing further capital. He cited a lack of recovery in its economic value and low equity returns.

Heathrow said last year it does not expect a full recovery before 2026, after airports globally suffered a huge drop in traffic when the Covid-19 pandemic grounded planes.

Updated: August 09, 2022, 5:55 PM
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