Investors could simply sell shares to the oil-rich state’s Public Investment Fund, which already owns a stake, according to a report.
Saudi Arabia could reportedly take a majority stake in London’s Heathrow, the UK’s main airport, while other investors are contemplating promoting their stakes.
The oil-rich state’s Public Investment Fund (PIF) partnered with investor Ardian to announce last month the acquisition of a 25% stake in the airport from Ferrovial, the Spanish infrastructure giant that had been Heathrow’s main owner for 17 years.
According to an article in the Sunday Times, at least one other shareholder is about to promote its stake, which will possibly be followed by another investment budget.
Under the terms of the airport shareholders agreement, other investors (adding the foreign pension budget with a total stake close to 35%) can sell at the same price, valuing Heathrow at around £9. 5bn, which is a generous valuation.
An unnamed head of one investor told the Sunday Times: “At that price, we are a seller.”
Representatives of the Saudi PIF and Ardian declined to comment. Heathrow also declined to comment. Saudi PIF and Ardian will keep their holdings separate, but the Saudis are partners in Ardian’s infrastructure funds.
The other investors in Heathrow’s parent company are directed through the Qatar Investment Authority, which owns a 20% stake and is said to be reluctant to sell to the Saudis. Five other shareholders own between 10 percent and 12. 6 percent, adding up to China’s sovereign wealth budget. and Singapore, which also stand out as sellers.
The other three investors are pension funds from Canada, Australia and the United Kingdom: the Caisse de dépôt et position du Québec, the Australian Retirement Trust, the China Investment Corporation and the U. K. ‘s Universities Superannuation Scheme, which did comment.
Moves towards Saudi control of Heathrow could prove controversial, although the UK has been far more relaxed about Middle Eastern power over ports than, for example, the US previously had been. Dubai-based DP World owns UK maritime ports and has been selected to run freeports in the UK.
The oil-rich PIF is one of the world’s largest active sovereign wealth budgets, with more than $700 billion (£551 billion) in assets. His most notable investments have been in sport, adding the purchase of the Newcastle United football club and the acquisition of professional golf. The PIF is controlled by Saudi Arabia’s Crown Prince Mohammed bin Salman, whose government has been accused of human rights abuses.
Heathrow’s passenger numbers trebled in 2022 as international travel rebounded from Covid. It made an adjusted loss of £684m last year, compared with a loss of about £1.3bn in 2021.
The airport has been locked in ongoing difficulties in pushing through its proposed expansion, with legal battles against its planned third runway and the immediate imperative lessened with traffic still below 2019 levels.
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The airport said the point of landing fees set through Britain’s aviation regulator, the Civil Aviation Authority, would be cut by a fifth next year would discourage investment, even if airlines continue to claim they are too high.
Under Heathrow’s investment model, as Britain’s main hub and true monopoly, fees are agreed and set through the CAA, based largely on the airport’s regulatory asset base, or RAB. This means that infrastructure expenses are largely reimbursed through fees, making the airport an interesting long-term investment for endowment funds.
Heathrow paid a dividend in 2023, but the CAA expects it to pay up to £1. 5 billion through 2027 as business returns to normal after the pandemic.
CEO Thomas Woldbye, who took over in October, is expected to oversee improvements to amenities over the next 3 years, adding the airport’s security program and a new baggage formula for Terminal 2.