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Manchester Airport Flies South On £1.5bn Ticket

Manchester Airport Group Takes Over Stansted

Written by . Published on January 19th 2013.


Manchester Airport Flies South On £1.5bn Ticket

THIS IS THE OFFICIAL, UNEDITED, FULL PRESS RELEASE FROM MANCHESTER AIRPORT GROUP OVER THEIR TAKE-OVER OF STANSTED AIRPORT. CONFIDENTIAL WILL LOOK TO PRODUCE MORE ANALYSIS NEXT WEEK. HOWEVER GETTING THE OFFICIAL FULL RATIONALE FROM M.A.G IS, WE BELIEVE, INTERESTING IN ITS OWN WAY. HAVE A READ, TELL US WHAT YOU THINK.

MANCHESTER AIRPORT GROUP (M.A.G) announces that it has been successful in its bid to acquire Stansted Airport and welcomes Industry Funds Management (IFM) as a strategic investor in M.A.G as part of the transaction. 

"M.A.G is a key driver of jobs and growth in the North of England and the acquisition of Stansted will help us deliver maximum value for Manchester City Council and the other local authority shareholders."

M.A.G will pay a consideration of £1.5bn to acquire Stansted after a transparent and highly competitive process. This represents an acquisition multiple of 15.6x 2012 EBITDA which compares favourably with similar airport transactions in the UK and reflects Stansted’s significant growth potential.  The transaction is expected to reach financial completion by the end of February. 

As part of the transaction, Industry Funds Management (IFM) will become an investor in M.A.G investing significant new equity and taking a 35.5% interest in the enlarged group, after having worked in close partnership with M.A.G through the acquisition process of Stansted Airport. 

M.A.G has a detailed integration plan in place to ensure a seamless transition of ownership and operations at Stansted which will maintain business as usual for passengers and customers.  The combined group that this acquisition creates will generate significant benefits for all stakeholders. 

M.A.G has a proven track record in successful airport management as the owner and operator of Manchester, East Midlands and Bournemouth airports.  In the twelve months ending 31 March 2012, M.A.G’s passenger numbers rose by 6.7%, revenues increased by 8.6% and underlying operating profit was up by 26%. 

Manchester AirportManchester Airport

IFM has investments in nine airports across Australia, including five major state capital city airports. In the UK, IFM already has significant investments in Anglian Water, the fourth largest water and sewerage company in England and Wales, and Arqiva Limited, the UK’s largest broadcast and wireless communications infrastructure company. 

Sir Richard Leese, Leader of Manchester City Council, M.A.G’s current majority shareholder said: 

"M.A.G is a key driver of jobs and growth in the North of England and the acquisition of Stansted will help us deliver maximum value for Manchester City Council and the other local authority shareholders."

Charlie Cornish, Chief Executive of M.A.G commented:

“We are delighted to be successful in our bid for Stansted Airport, the London airport for Europe. The transaction represents a significant milestone in the achievement of our previously stated strategy of adding a quality airport to the group and delivering long term value to our shareholders.

“M.A.G has a strong track record of creating shareholder value through strategic investment and enhancing operations to improve customer service and drive increased passenger numbers. We will use that expertise at Stansted to ensure that the airport can fulfil its potential as a high quality alternative London access point for global air travellers. Stansted has scope to benefit from significant volume growth over the short, medium and long term. 

“Our bid for Stansted has been under development for well over a year. We have been delighted to work closely with IFM to create a compelling and unique partnership that has been instrumental in providing the capital for this important transaction which sees one of Europe’s largest airport operators now based in Manchester. Today’s announcement is excellent news for M.A.G and our shareholders; it marks the start of a new chapter for the Group.” 

Christian Seymour, Head of Infrastructure, Europe, at IFM commented: 

“We are delighted by today’s announcement which will see IFM become a strategic investor in M.A.G.  It is the culmination of 18 months’ work developing a strong, long term partnership with M.A.G, and is an important part of our focused strategy of investing in core, high-quality infrastructure assets. IFM is a highly experienced investor in airports, having invested in these assets since 1997.”  

Lord Peter Smith, chair of the Association of Greater Manchester Authorities, said: 

"This represents a good deal for the local authority shareholders which will give Manchester Airport Group a stake in the important South East air traffic market and strengthen M.A.G by enabling it to capture synergies with airline operations at both Manchester and Stansted, expanding the network of services and encouraging growth.”

Further notes

The funds for the acquisition come from new equity raised from IFM, together with investment grade financing.  All the existing shareholders’ equity has been maintained in the Group. 

M.A.G 

M.A.G is the largest UK-owned airport operator, serving 24 million passengers and handling almost half a million tonnes of air freight every year, through its ownership and operation of Manchester, East Midlands and Bournemouth airports. Its property and facilities management arm, M.A.G Developments, is responsible for the Group’s estate and also the development of Manchester Airport City. 

M.A.G’s overall strategic intent is to increase long term shareholder value by generating profitable growth, developing its assets and deploying efficient and customer focused operating processes throughout the business. 

The Group’s three airports and property business already contribute more than £3bn to the UK economy and support over 86,000 jobs. M.A.G is owned by the ten local authorities of Greater Manchester. 

IFM

IFM is a global investment manager with investors and offices in three of the largest pension markets in the world. Headquartered in Melbourne, Australia, with offices in Sydney, London and New York, IFM manages over £24 billion across four asset classes – infrastructure, debt investments, private equity, and listed equity portfolios. 

IFM invests on behalf of institutional investors and is owned by 30 major not-for-profit Australian superannuation funds. IFM is actively committed to the United Nations Principles for Responsible Investment (UNPRI) and has been a signatory since 2008. 

IFM is a highly experienced, long-term investor in airports. It has held investments in airport assets since 1997. Through its Australian Infrastructure Fund, IFM currently has significant interests in nine airports across Australia, including five major capital city airports. In 2011, IFM owned airports facilitated the flow of over 72 million domestic and international passengers. 

As at 30 September 2012, IFM’s airport investments exceeded A$1.8 billion in equity value.

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9 comments so far, continue the conversation, write a comment.

AnonymousJanuary 19th 2013.

We, as taxpayers, need to see benefit from this. Money needs to come back to Manchester and the other MAG councils. If a disproportionate amount of the money starts being filtered into that private company thanks to the taxpayer investment, it will be a waste and completely unacceptable.

1 Response: Reply To This...
AnonymousJanuary 19th 2013.

Can't disagree, but I think that would be largely the starting point for the strategy.

AnonymousJanuary 19th 2013.

Loving your positivity, well done.

1 Response: Reply To This...
DavidJanuary 21st 2013.

I not loving your positivity.If Manchester wanted to maximise financial returns for its citizens it would not be buying a airport.I would suggest there are many other investments that would produce a greater return.
But if they had any real sense they would have used the proceeds from a sale of part ownership in MAGs to invest in the transport infrastructure of Greater Manchester.They could even have paid for new museums and galleries.
But they preferred to invest in a London Airport,where no doubly all the senior management will soon be based.

the Whalley RangerJanuary 21st 2013.

A starting point for a strategy...

yes of course, the big picture view must include the imminent development of the Manchester Airport City Enterprise Zone, the efficiencies from running 4+ national airports and the hub capacity gains that entails.

Stansted and Manchester capacity levels are actually quite similar - surely, establishing hub status for certain international routes will be beneficial for both sites? Why now for example continue to rely on Gatwick as a hub to connect to the Caribbean? One would expect MAG to now sporting a sufficiently large catchment area and service this an other destinations without the hassle we currently face (hub status will increase revenue), all whilst attracting additional business in a newly created enterprise zone due to an expected increase in connectivity.

A good plan, a good move.

2 Responses: Reply To This...
the Whalley RangerJanuary 21st 2013.

*sport*

Duke FameJanuary 21st 2013.

I'm not so sure the best approch will be to dictate how the customers (i.e. the airlines operate)

Ther will be economies of scale but there will be decisions to make where logic may mean closing certain operations in Manchester and moveing to Stanstead. This will not sit comfortably with the political aspirations.

AndyJanuary 22nd 2013.

I hope that somehow this purchase will enable M/cr Airport to become an additional hub for BA and others, so that we in the North don't have to traipse down to Heathrow to catch international flights with our National carrier. So many slots at Heathrow could be freed up (feeder flights and long haul) by relocating some of them to Manchester. After all with 2 runways and a capacity of 50 million and geographically central to the UK it makes sense.

1 Response: Reply To This...
Duke FameJanuary 22nd 2013.

That will not make a difference to the airlines unless MAG can offer them some sort of better deal than they do already.

Businesses tend to take over other businesses if it's part of some strategic plan or they feel they can save on some of the existing costs by closing / merging some operations.

I do worry that Leese seems to be a spokesman, his experience of business is basically a town clerk and can't be up to the job. The strategy does not seem very clear.

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