Reaching For The Skies

Garry White writes:

Manchester Airport Group (MAG) has won the auction to buy Stanstead Airport from BAA for £1.5bn. The airport was put up for sale in August after BAA, which is owned by Spanish group Ferrovial, was forced by competition regulator to sell off assets increase competition.

MAG’s Australian partner, Industry Funds Management (IFM), will become a strategic investor in the UK airport group as part of the transaction, owning 35.5pc of the company. MAG also owns East Midlands and Bournemouth airports and IFM owns investments in nine airports across Australia, including five major state capital city airports.

MAG said that the price represents an acquisition multiple of 15.6 times 2012 earnings before interest, tax, depreciation and amortisation (EBITDA) and was in line with similar airport transactions in the UK. Edinburgh Airport was recently sold on a multiple of 16 times EBITDA and Portugal’s ANA airport was sold for 15 times.

There had been some speculation that the airport would be sold on a low multiple as budget airline Ryanair accounts for about 70pc the airport’s traffic. Ryanair’s combative approach to pricing was expected to drag down the price. “We are delighted to be successful in our bid for Stansted Airport, the London airport for Europe,” Charlie Cornish, chief executive of MAG, said. “The transaction represents a significant milestone in the achievement of our previously stated strategy of adding a quality airport to the group and delivering long-term value to our shareholders.”

The majority shareholder in MAG is Manchester City Council, which welcomed the deal. “MAG is a key driver of jobs and growth in the north of England and the acquisition of Stansted will help us deliver maximum value for Manchester City Council and the other local authority shareholders,” Sir Richard Leese, Leader of Manchester City Council, said. Other bidders were Australia’s Macquarie and Malaysia Airport Holdings. Private equity group TPG and New Zealand investment manager Morrison previously expressed an interest, but did not submit formal bids.

Graham Robinson, infrastructure expert for international law firm Pinsent Masons, said the deal could potentially point towards a greater use of regional airports to help solve the lack of aviation capacity in the South East. He said: “With this deal, Manchester Airports Group is poised to take a key stake in the future growth of the South East aviation market, which is currently constrained by a lack of capacity. Ownership of Stansted by MAG will no doubt help build synergies with the largest regional airport operator in the UK, pointing to a new direction in the future of the much debated airport capacity issues in the South East.”