80:20 bid for Stansted

PETALING JAYA: YTL Corp Bhd and Malaysia Airports Holdings Bhd (MAHB) are putting together a firm bid for London's Stansted Airport in an 80:20 equity structure, sources told StarBiz, confirming earlier reports.

“The bids will be called mid-week and the YTL-MAHB bid stands a good chance. If they succeed, it will be a major coup for both, as Stansted Airport is already operationally profitable and holds growth potential,” said a source familiar with the situation.

The low-cost carrier terminal is being offered for sale by UK airports operator Heathrow Airport Holdings Ltd, formerly BAA, to satisfy competition concerns after a four-year battle with regulators. The reported figure is £1bil (RM5bil).

Another industry player, however, said there was the possibility of Khazanah Nasional Bhd, the parent of MAHB, becoming part of the consortium. However, StarBiz has yet to get any confirmation of this.

What is clear from checks with industry sources is that YTL Corp is very keen on holding the majority in the consortium and has sufficient funds for its equity portion. YTL Corp already owns UK's utility company Wessex Water Ltd and recently acquired hotels there. YTL Corp's Tan Sri Francis Yeoh and MAHB's Tan Sri Bashir Ahmad are very much involved in the deal to buy Stansted.

If their bid is successful, it will add to the list of Malaysian corporate acquisitions of iconic UK assets, following last year's acquisition coup by the SP Setia-Sime Darby-Employees Provident Fund consortium of the Battersea Power Station project.

While putting up the equity portion for the bid is less of a problem for cash-rich YTL Corp, does MAHB have sufficient firepower for coming up with its RM1bil (£200mil) portion?

Sources told StarBiz that MAHB can manage that amount and had the funding plans for that. However, it might not be able to spend more than that on the Stansted bid, the sources added.

More significantly, MAHB would naturally play a key role in the management of Stansted if the Malaysian consortium were to win the bid.

The race for Stansted Airport, the third busiest in London and fourth busiest in Britain, attracted several bids but has now been reduced to three after New Zealand investment management company HRL Morrison & Co Ltd last week dropped out because it could not secure funding for its bid.

The other two bidders are Manchester Airports Group which is owned by 10 local authorities and is bidding jointly with Australia investment firm Industry Funds Management and Australia's Macquarie Group Ltd.

A win will give MAHB access to the European markets since it has been on the lookout for more airport management projects.

It also hopes to secure some in Indonesia and China where it is holding talks.

MAHB now holds 10% stake each in Delhi International Airport Ltd and GMR Hyderabad International Airport Ltd, and 20% in Sahiba Gokcen airport in Istanbul.

It also manages Khazakhstan's Astana Airport and is in a dispute over its contract to manage Male International Airport after a change in the local government, in which it has a 23% equity stake together with India's GMR group.

Locally it operates 39 airports and is building the RM4bil terminal KLIA2 for budget carriers.

“The Stansted Airport is an outright sale, not a concession. Stansted is attractive because it is the only airport which can cater for future growth of passengers unlike Heathrow and Gatwick, which are facing capacity constraints.

“Stansted is the only airport among the three in London, where an additional runway can be built should the need arise.

“And it is a profitable concern. There is also no immediate need for additional funds for expansion since the capacity utilisation is only 65% now,'' said a source.

An analyst report said “Traffic volume at Stansted Airport is projected to bounce to 24.6 million passengers by 2019 and Stansted Airport's earnings before interest, tax, depreciation and amortisation is expected to hit £87.3mil (RM436mil) and rise to £201mil (RM1bil) in the next few years.”

As at September 2012, Stansted handled 17.4 million passengers and 14 airlines operate from the airport, and its biggest customer is budget carrier Ryanair.

Heathrow Airport Holdings has already sold Gatwick, London's second-busiest airport and Edinburgh airport to comply with the UK Competition Commission's concern over its dominance of the UK airport sector.

MAHB share price inched 1 sen up to RM5.63 yesterday while YTL closed up two sen to RM1.83.

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