From today's Sunday Times:
Australian group in bid for TBI aiports
John Waples
French raid shakes up regional airports firm
MACQUARIE, the Australian investment bank that specialises in infrastructure projects, has approached TBI, the regional airports owner, about tabling a rival takeover offer.
The Australian company, which is valued at £2.4 billion, last year put together a consortium to acquire Bristol airport for almost £200m. It is keen to build a portfolio of international airports and has recently been looking at several opportunities in Europe.
Grupo Ferrovial, a Spanish construction group that partnered Macquarie in the Bristol purchase, is also believed to have been in contact with Keith Brooks, TBI's chief executive, in the past three days.
Last Wednesday TBI found itself on the receiving end of a £516m bid from Vinci, the French construction group, valuing the company at 90p a share. But the market remains convinced that a higher offer will materialise and the share price closed on Friday at 95p.
Fraport, the £1.8 billion quoted German group that owns Frankfurt airport, has also contacted Brooks and could emerge as a rival bidder. Brooks last week rejected the offer made by Vinci and put his group up for auction.
TBI's assets include Cardiff airport and Belfast International, as well as a majority stake in Luton airport.
Analysts at WestLB believe that if a bid battle develops, the eventual take-out price could be as high as 115p. They said: "There are good reasons why a higher value could be achieved as the scarcity value of Luton and the potential savings to a bidder are not fully reflected in the price."
The broker believes that closing TBI's London head office could cut overheads by £7m.
International interest in Britain's regional airports is high. There were more than 20 other bidders for Bristol airport and there
was also strong interest when Stagecoach sold Prestwick airport near Glasgow.
Macquarie has deep pockets and has already raised nearly £250m for an airport investment fund.
TBI is taking the approaches it has had seriously, but so far no company has officially declared that it will mount a rival bid.
Vinci, which owns 26 airport concessions around the world, is working on its offer document and its position has been helped by the acquisition of a 15% stake in TBI from Schroder. It is already sitting on a handsome paper profit from these shares.
Vinci's offer is conditional on TBI renewing the contract it has with Easyjet at Luton. It handles the passengers and baggage for the low-cost airline.
A Vinci spokesman said: "The contract is a critical part of TBI's earnings and if it were materially less it would have a huge impact on the value of the company."
THE French have never been shy of making a play for some of Britain's prized assets. They already control a large slice of our water, building-materials and insurance
businesses. Now they are casting an acquisitive eye over our airports.
Vinci, the French construction giant, last week swooped on TBI, Britain's biggest owner of regional airports. Vinci picked up a 15% stake from Schroders, TBI's second-largest
investor, on Monday - and within two days had launched a £516m hostile bid (excluding debt of £160m), valuing its target at 90p a share.
The offer was pitched at a 50% premium. However, if Vinci wants to take control of the company, analysts say it will have to pay more than 100p a share. TBI's shares closed the week at 95p, valuing the company at £550m. The share price has been buoyed by comments from Keith Brooks, TBI's chief executive, saying he has had approaches from other parties.
Brooks and Caroline Price, his finance director, have in effect put the company up for auction and its days as an independent
company are numbered. But whoever takes control, last week's bid marked a sad end for a company that started with so much promise.
TBI made its stock-market debut seven years ago after reversing into Markheath Securities, a struggling property company. TBI's biggest investor, Stanley Thomas, who made his fortune from a meat-pie business, wanted to build up a property investment company, but Brooks had other ideas.
He was one of the first to spot the huge opportunities in regional airports. He bought Cardiff airport in 1995 and later added Belfast International. Then he built up the portfolio by taking a controlling stake in Luton airport and making smaller airport
investments in Florida, Stockholm, Bolivia and Costa Rica.
TBI attracted a strong institutional following and sentiment was further helped when it became a focused aviation group after
selling its property portfolio for £190m in May 1999.
With the proceeds, TBI paid £86m for AGI, an American airport group, which at the time owned a 25% stake in Luton and had other airport assets. The deal was mainly funded through the issue of 65m shares, which made AGI's investors, including George Soros and Lockheed, big shareholders in the enlarged
company.
TBI was one of the first companies to move into airports but soon the market became overcrowded. The big three transport groups - Stagecoach, National Express and Firstgroup - all moved in and the strong interest pushed up airport valuations.
This helped TBI's share price, but its status as a stock-market darling was shortlived. Since peaking at 126p in May 1998, its share price has yo-yoed and confidence has been knocked by several profit warnings. The latest was earlier this month when BMI British Midland pulled out of operating from its Belfast airport.
Brooks said the decision would result in a 10% fall in earnings, but investors thought otherwise and the share price fell more than 30% to 57p.
Brooks knew TBI was vulnerable to an unsolicited offer. "Airports are medium to long-term businesses and I am convinced that our strategy will prove to be an excellent one. But at the moment the market does not appear to share that view," he said.
In mid-July, Brooks took a call from Warburg, Vinci's investment-bank adviser. The bank said it had a client interested in holding talks.
A meeting between Brooks and Antoine Zacharias, Vinci's chairman, was arranged in London and an offer was put on the table. At the time TBI's share price stood at 85p and the initial offer was pitched at a higher level than 90p. It was rejected by the board.
Zacharias moved back in for the kill when TBI's shares collapsed after the BMI move.
Last Tuesday, Jean-Luc Pommier, Vinci's corporate development director, and Christian Labeyrie, its chief financial officer, met Brooks at the City office of TBI's broker, Hoare Govett. Brooks was left in little doubt Vinci would go hostile the next day.
This is not the first time TBI has been the subject of bid speculation. Last year a consortium headed by Dermot Desmond, the Irish businessman who owns London City airport, made a tentative approach at 120p, but the talks fizzled out. Desmond remains an investor and he could return as a white knight.
Analysts say TBI will be no walkover. They believe the bid battle will boil down to what valuations are placed on the airports - and
Brooks is already doing his best to talk these up.