Aeroports de Paris Prefers Fixer-Uppers as M&A Prices Go `Crazy'

  • French company reins in ambitions as funds inflate bids
  • Contracts to grow existing infrastructure more affordable

Aeroports de Paris ’s plan for expanding its airport portfolio is to focus on the fixer-uppers -- after investment funds and construction groups pushed the price of major hubs to dizzying levels.

Rather than pay inflated sums for prime facilities, the owner of the French capital’s Charles de Gaulle and Orly airports is looking for more challenging projects that less-experienced investors may shy away from, Deputy Chief Executive Officer Patrick Jeantet said in an interview.

“If competition is very high, prices sometimes go crazy,” Jeantet said. “We don’t do crazy prices. We focus on airports with growth potential in complex situations, like brownfield expansion, where you have to operate an existing airport while building a new terminal.”

Airports have become prized assets as infrastructure and pension funds seek long-term investments amid low interest rates, sending prices soaring. ADP’s move to eschew the biggest takeovers and contracts is a far cry from its 2012 purchase of TAV Havalimanlari Holding AS of Turkey, one of the industry’s most prominent deals.

Retail Factor

The retail expertise of ADP also means the company is able to secure higher returns from its shops than some rivals, he said, allowing it to bid more.

ADP isn’t averse to takeovers and will continue to participate in tenders, while seeking out controlling stakes in medium-sized airports in countries with stable legislation, the executive said, adding: “What we want now is to control, or co-control, as the biggest shareholder the strategy of the airports we invest in.”

Santiago airport in Chile, where a group in which ADP has a 45 percent stake will take over operations this month, will almost double capacity to 30 million passengers a year by adding a new terminal and is just the sort of hub the company finds attractive, said Jeantet, who spoke at a convention in Cologne.

The five biggest airport deals since Spanish builder Ferrovial SA bought the operator of London’s Heathrow hub for 15.6 billion pounds ($24 billion) in 2006 have all come in the past three years, according to data collected by Bloomberg.

‘Crazy’ Price

Of those, Brazil’s sale of concessions to run terminals in Sao Paulo and Rio de Janeiro for about $8 billion apiece fell into the “crazy” category, while the 308 million-euro ($345 million) purchase of Toulouse Blagnac by a Chinese group was also overpriced, Jeantet said.

ADP also missed out on Turkey’s sale of a site set aside for a 150-million-passenger superhub after the bidding reached $29 billion, even though its 38 percent ownership of TAV, operator of Istanbul’s Ataturk airport, had appeared to put it in prime position.

TAV has 14 concessions won through tender offers and brings vital expertise in securing such projects, contributing a “business culture” to a group that was formerly state owned, Jeantet said.

ADP was named preferred bidder for two airports in Madagascar in May and is competing for a package of regional airports in the Philippines. In Saudi Arabia, it’s seeking to run Jeddah airport and may have an advantage over rivals in already operating a terminal there devoted to the hajj pilgrimage.

While ADP will refrain from bidding for Lyon airport, it hopes to secure a minority stake in Nice, France’s third-largest terminal, when a sale process starts later this year. London City airport, up for sale after being acquired by Global Infrastructure Partners for 750 million pounds in 2006, would be bigger than typical targets, it said.

Fraport AG Chairman Matthias Zieschang said in August that the Frankfurt airport owner’s deal pipeline was “empty” beyond a contract in Greece after failed bids including the Brazilian bases, Quito in Ecuador, two holiday hubs in Turkey, Portugal’s airport operator and the Istanbul auction.

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