Investment funds managed by Macquarie Bank are battling a rival bid backed by Industry Funds Management to buy control of UK airport Stansted, according to a UK newspaper report.
The Daily Telegraph has reported that a bidding group led by investment manager Morrison & Co, which operates Infratil, has dropped out after failing to secure bank finance for its offer.
Its exit from the auction ahead of the January 16 deadline for final offers is expected to turn the contest into a dog-fight between the council-owned Manchester Airports Group, which is being backed by Australian investor Industry Funds Management (IFM), and financial bidder Macquarie, the newspaper report.
While there is a chance of a bid from Malaysia Airports Holdings, which owns 39 airports in its home market, it is currently considered an outsider, according to the report.
One banker familiar with the bid said: “At the moment this looks a shoot-out between Manchester and Macquarie’’, the Telegraph reported.
The Morrison consortium also included Wellington-based infrastructure investor Infratil and the New Zealand Superannuation Fund – and had strengthened its firepower as recently as November by adding Australia’s Retail Employees Superannuation Trust, which has £15bn under management.
However, the consortium’s banks are understood to have balked at the potential risks of funding a bid for a regulated airport dominated by Ryanair, which is responsible for 70 per cent of Stansted’s traffic, according to the newspaper.
Since Stansted is regulated by the UK’s Civil Aviation Authority, bidders have been told that the financial structure of their offers must be investment grade, requiring a hefty equity component of at least £500million with no more than 50 per cent of the financing to come from debt, the newspaper said.
However, banking sources said this was too onerous for the potential lenders to the Morrison consortium, given the risk that the final price could spiral several hundred million north of £1billion and there was no certainty over Ryanair’s long-term plans at Stansted.
Any decision by the Irish airline to shift planes away from its UK hub would have a dramatic impact on Stansted’s value, it reported.
Manchester Airport is thought to be close to securing the financing for its bid, with the city council and IFM, which has £21billion under management, each expected to take a 35.5 per cent stake in the bid vehicle with the rest of the equity held by the other nine local authorities of Greater Manchester.
The financing of a bid from Macquarie, which has widespread experience in infrastructure, is less clear, though it is understood to have been tapping up investors in recent weeks, according to the report.
The auction is being handled by Deutsche Bank and ING. None of the parties involved would comment.
The original release of this article first appeared on the website of Hangzhou Night Net.