China’s sovereign wealth fund bought 10 percent of London’s Heathrow Airport from investors, including Spanish builder Ferrovial SA (FER), as the fund seeks to boost investment returns amid a global economic slowdown.
China Investment Corp., which helps China manage the world’s largest foreign-currency reserves, paid Ferrovial 257.4 million-pound ($414.6 million) for a 5.72 percent of Heathrow parent company FGP Topco Ltd., the Madrid-based company said in a statement yesterday. The $482 billion fund also added shares from other investors, bringing its total holdings of the hub to 10 percent, according to the statement.
“We will continue to work with the new shareholders and with existing shareholders” to maintain Heathrow’s rank “as one of the best infrastructure assets in the world,” Ferrovial Chief Executive Officer Inigo Meiras said in the statement.
CIC posted a 4.3 percent loss on its overseas investments last year, its worst performance since the Beijing-based company was set up in 2007, as declines in global commodity prices roiled the value of its resources-heavy portfolio. The weak recovery in the global economy is posing a challenge to overseas investments, CIC’s Executive Vice President Fan Yifei told a seminar in Tsinghua University in Beijing yesterday.
CIC has taken a “flexible” approach in its investments abroad such as by taking minority stakes in target companies amid rising wariness over foreign acquisitions by Chinese firms, he said. Two calls to CIC today went unanswered.
Chinese companies should avoid “a headlong rush” to acquire foreign assets as it could stoke suspicion in the countries they invest in, Fan said.
The Chinese fund’s board requires a 10-year annualized investment return ratio to be 3 percentage points higher than inflation in G20 countries excluding China and the European Union, according to Fan.
The fund can tolerate short-term volatility in its investments because dividends from Chinese lenders, including Industrial & Commercial Bank of China Ltd., the world’s most profitable bank, are enough to cover its interest payments from a bond sale for now, Fan said.
CIC owns Central Huijin Investment Ltd., which controls the nation’s largest banks.
Ferrovial agreed in August to sell a 10.6 percent stake in Heathrow to Qatar Holding LLC. Ferrovial, controlled by the family of Chairman Rafael del Pino, is seeking to diversify assets, Meiras said today.
To contact the reporter on this story: Kari Lundgren in London at email@example.com