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Investors owning 35% of UK’s biggest airport push to exit as £2.4bn deal with Saudis and private equity under threat

Several shareholders in Heathrow that between them own 35 per cent of the London airport have said they want to sell out alongside majority owner Ferrovial, according to the infrastructure group, as part of £2.4bn deal agreed last year.

Ferrovial agreed to sell its 25 per cent stake in the UK’s biggest airport in November for £2.4bn to French private equity company Ardian and the Saudi Public Investment Fund, ending 17 years of ownership.

As part of that deal, the airport’s other shareholders were given the option to sell their own stakes at the same valuation, with the Saudis and Ardian offered first refusal. Ardian originally agreed to buy 15 per cent, and the Saudis 10 per cent.

On Tuesday, Ferrovial said that several other shareholders had decided to exercise their “tag-along” rights, throwing a potential roadblock in the way of the transaction. With 60 per cent of the airport now involved in the sale process, the £2.4bn deal could collapse if all the shareholders cannot find buyers.

Ferrovial added it was a “condition” of the transaction that the “tagged shares” were also sold.

Neither Ardian or the Saudis are compelled to buy the new shares on offer. The Saudis plan to stick with their original plan to buy 10 per cent and do not want to increase their stake in the airport beyond this, according to a person familiar with the deal. Ardian is considering raising its offer, the person said. 

Another option being considered is for the Saudis and Ardian to find a third investor to come on board to take the fresh stakes.

Ferrovial did not name the other shareholders who intended to sell. Heathrow’s other owners are Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), Singapore sovereign wealth fund GIC, the UK’s Universities Superannuation Scheme, Qatar Investment Authority, the Australian Retirement Trust and China Investment Corporation. 

The change in ownership would represent one of the biggest shake-ups in Heathrow’s boardroom since it was privatised under the Thatcher government in the 1980s.

Any new investors will buy into an asset that has been lossmaking for three years because of the pandemic and travel restrictions, but with a history of generating strong returns for shareholders.

Still, plans to build a third runway to generate significant new growth have stalled amid high inflation and rising interest rates.

Heathrow’s management has instead been exploring less radical options to increase passenger numbers, such as upgrading terminals and its road links, the Financial Times reported last month.