“It’s a world record for such transactions involving airports,” gushed Portuguese Treasury Secretary Maria Luis Albuquerque.
The Portuguese government official was referring to what must have looked like a generous Christmas gift from French infrastructure group Vinci: a €3.08 billion cheque for the acquisition of Portuguese airports operator ANA, which holds a 50-year concession to manage the country’s 10 airports.
Whether the sum paid by Vinci really is a world record or not, the French group offered a generous 16 times ANA’s earnings before interest, tax, depreciation and amortisation (EBITDA).
In the process, it bested the second-highest bidder – a consortium of Germany’s Fraport and Australia’s Industry Funds Management – by a hefty €638 million. When compared with the lowest bid – Flughafen Zurich and Global Infrastructure Partners’ (GIP) €2 billion offer – it can become hard to fathom what exactly motivated Vinci.
But while it might be tempting to write-off Vinci as another unfortunate victim of the much-ballyhooed ‘public auction virus’ – the condition which feverishly loosens wallets and sends conservative investors to worship at the altar of ‘proprietary deal flow’ – here are three speculative reasons that might explain Vinci’s gambit:
1) Vinci had long wanted to boost its airports business.
ANA was not the first airports operator Vinci had tried to acquire. Prior to buying it, Vinci had attempted to purchase a stake in Turkey’s TAV and expressed interest in the 'on-again, off-again' sale of Hochtief Airport.
But ANA’s acquisition is a transformative move for Vinci Airports. Prior to ANA, Vinci’s airports division managed 10 regional French airports and Cambodia’s three hubs, which handled a combined 10 million passengers. With ANA on board, Vinci Airports will handle 40 million passengers a year, including a 15 million-passenger European hub.
Revenues pre-ANA were around €150 million; post-ANA, they will be a much healthier €600 million.
Plus, ANA has been growing at more than 4 percent a year over the last decade. With Brazil and parts of Portuguese-speaking Africa experiencing strong growth, Vinci is well-placed to capitalise on Lisbon Airport’s strategic position to further ANA’s development.
2) ANA is peerless.
Vinci is a giant construction company with considerable experience as a transport concessionaire in the roads and rail/high-speed rail sectors. But when it comes to airports, it’s arguably just getting started.
With ANA, as mentioned above, Vinci has the opportunity to catapult its airports business to the major league. And, best of all, it can leverage ANA without having to worry about the competition.
Whereas in the UK a second runway for GIP’s Gatwick Airport means there will be no third runway for Ferrovial’s Heathrow, ANA has that much-coveted infrastructure characteristic: it’s a textbook monopoly.
3) Lisbon will have a new airport – seriously.
Veteran project financiers can be forgiven for grimacing at that heading. After all, the 'New Lisbon Airport' has taken on the qualities of a mythical creature: everyone talks about it; some swear it’s real; but has anyone actually seen it?
Still, Lisbon will eventually have a new airport. The city’s existing airport is bursting at the seams and will have to be expanded just to cope with demand. But the planned expansion is a palliative; when the crisis blows over, the government will have to address the underlying condition.
And when that day comes, Vinci will be in a unique position to add that €3 billion to €5 billion new concession to its portfolio.
Is all of this worth a €638 million premium? Maybe. But even if you think what Vinci did was madness, it’s hard to argue there’s no method to it.