EMEA: CPPIB silent on Gatwick Airport report

22 October 2018 - 12:00 am UTC

Canada Pension Plan Investment Board (CPPIB) has declined to comment a UK broadcaster report that it is in talks to buy a stake in Gatwick Airport. 

The report said the Canadian pension fund is part of a group of investors proposing to buy GIP’s 42% stake in Gatwick in a deal that could value it at more than GBP 3bn.

In August Inframation reported Gatwick’s other shareholders – ADIA (15.9%), CalPERS (12.7%), National Pension Service of Korea (12.1%) and the Future Fund (17.2%) – had made way for GIP to sell its stake by saying they would not seek to exercise their pre-emption rights. 

The broadcaster’s report said GIP is expected to retain a management contract following any sale and could sell “most or all” of its stake in the airport. 

A newswire has separately reported GIP is close to selling its stake to existing co-investors in the airport.

Industry observers following the process have previously told Inframation that they understand GIP will seek to retain management rights following any sale and that they could seek to retain a small stake.

“I think they are seeking to sell 20% to 25% of Gatwick,” said one observer, who also said that he understood CPPIB and its fellow Canadian pension fund PSP Investments had been in talks about buying the stake.

GIP and CPPIB declined to comment. PSP Investments did not immediately respond to a request for comment.

GIP holds its stake in Gatwick via its first USD 5.6bn (EUR 4.9bn) fund, which matured last year but can be extended to 2019. Shareholders in the fund include Swiss bank Credit Suisse and the US conglomerate General Electric.

A sale of Gatwick, the UK’s second biggest airport after Heathrow, would be a major test of investor appetite for UK airports, which have recently been achieving high valuations.

Analysts and investors do not expect Gatwick to achieve the reported 45 times EBITDA multiple that GIP received for London City Airport in 2016, largely due to Gatwick’s lack of spare runway capacity, which limits future passenger volume growth.

Gatwick has been pushing to be allowed to build a second runway, but the UK government recently instead opted to allow Heathrow to build a third runway. But Gatwick, which is operating close to capacity, recently announced plans to use its emergency runway.

Analysts say a 20 times multiple is a more likely price for the Gatwick stake.  Based on Gatwick’s circa GBP 373m EBITDA for 2017, this values the entire airport at almost GBP 7.5bn. Gatwick has a regulatory asset base of around GBP 3.7bn.

GIP also owns Edinburgh Airport in the UK and is understood to be planning to sell it in the near future. GIP is understood to be hoping to sell Edinburgh Airport for around 30 times EBITDA.

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