Manchester Airport Group PLC – Market Cap: N/A (private company)

Heathrow Airport Holdings LTD – Market Cap: N/A (private company)

Deal type: 100% Acquisition

Size: £1.5 bn

Heathrow Airport Holdings LTD announced on 28th February that it has completed the sale of its 100% interest in Stansted Airport LTD to Manchester Airports Group (MAG) for £ 1.5bn in cash. The acquisition price is 15% higher than recent valuations for the target, which were valuing it at £1.3 bn. The transaction was concluded with an acquisition multiple of 15.6 times EBITDA, a value which is in line with similar transactions in European airports (Edinburgh Airport has been sold in 2012 at 16X EBITDA; Portugal ANA airport was sold at 15X EBITDA).

Stansted Airport is London’s third busiest airport with approximately 17.5m passengers and 131,400 flights every year. Stansted’s EBITDA was £86.6 million in 2011 and is estimated to be £94.2 million in 2012. Moreover the airport has good growing opportunities and has the potential in the future to increasingly become a “superhub”, given that London’s mayor indicated it as the only alternative to building a new airport to serve the capital.

The Stansted Airport spin-off is the final step of a divestiture process forced by the Competition Commission that started in 2008 with the sale of Gatwick Airport. Following the sale of Stansted, Heathrow Airport Holdings will operate four airports: Heathrow, Southampton, Aberdeen, and Glasgow. The Holding company was previously named BAA and following the divestiture process decided to rename itself Heathrow Airport Holdings LTD in 2012. The decision was a consequence of the evidence that it no longer represents all British airports and can’t be considered a group (Heathrow will account for more than 95% of the business).

Along with Manchester Airport, other companies interested in the deal were Malaysia Airports Holdings Bhd and Macquarie. Ryanair, which uses the airport as hub was also interested in the acquisition, and wanted to take a minority stake (25%), but Heathrow Holdings refused its offer.

The British regulators have told the bidders that, in order to avoid excessive leverage, they would authorize only offers financed at least with 50% equity.

Manchester Airport set up a bid vehicle owned at 35.5% by MAG itself and Industry Funds Management (the largest investor in Australian airports), and the remaining shares in the hands of local authorities. MAG financed the acquisition with a £1.2bn club loan from a group of 13 banks. The loan is structured into 5 investment grade facilities, which are a mixture of term loans and revolving credit facilities.

There are still no official data about the use of the cash inflow from the divestiture by Heathrow Airport. On the one side the company has ambitious plans for the future, for example enhancing Heathrow hub and further develop it. On the other side, the private company is highly levered, and may use money to restructure its financial position.

J.P Morgan and Gleacher Shacklock LLP acted as financial advisors to the buyer while advisors to the seller included Deutsche Bank, ING and PwC.


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