The privatisation of Aeroportos de Portugal, (ANA) was one among many of the demanding and challenging commitments undertaken within the Financial and Economic Assistance Programme signed between the European Commission (EC), the ECB, the IMF, and the Portuguese government.
ANA, together with Aeroportos e Navegação Aérea da Madeira (ANAM) manages 10 airports across Portugal – Lisbon, Porto, Faro, Beja – four airports in Azores and two airports in Madeira – that account for almost the entirety of the commercial air traffic in the country. Portugal’s airport operator was sold to Vinci Group for €3.08bn. This represents over 15 times the company’s €199.8m earnings before interest, taxes, depreciation and amortisation (EBITDA) in 2011. According to airline-industry data, the average multiple of recent deals in the sector is eight times 2011 EBITDA.
However, the importance of this transaction derives not only from the amount of cash paid by Vinci Group to the Portuguese state, but more importantly, from its role as part of the Portuguese government’s strategy to improve the competitiveness and robustness of the Portuguese economy, which aims at strengthening the development of the Portuguese airport network and encouraging the involvement of the private sector in productive investments.
This achievement constitutes good evidence that, even in times of crisis, Portugal remains appealing to business investments and is capable of attracting foreign investors (see Fig. 1). It is absolutely remarkable that, in less than six months, the Portuguese government, together with its advisors, was able to launch and conclude this privatisation process with such an outcome, in an extremely competitive environment and in full compliance with strict transparency and competition rules.
New regulatory model
Together with the privatisation process and before its conclusion, the government approved a new legal framework and the economic regulation applicable to the airport concession, and signed a concession agreement with ANA for a 50-year period.
There is no doubt that the clear economic regulation established created requisite conditions in the absence of which the successful outcome of the privatisation would not have been possible. In fact, such regulation aligned the public interest with the shareholders’ expectations and established a rational approach to increasing capacity, when and if required.
Moreover, a governance model was also set out in the concession agreement, aiming to balance the relationship between the grantor and the concessionaire, allowing the country’s representatives to reflect the national interest and to influence the management of the airports network, namely through the approval of a strategic plan for each five-year period.
The incentive for the passengers’ growth in the new economic regulation process and in the concession agreement, is for the clear indication to develop additional capacity in the Lisbon region, and the integrated management of the network assets to assure a proper return on the overall employed capital, supporting the process of adding value that has contributed to the positive final outcome.
The privatisation process was organised to fully ensure the participation of the widest number of adequate bidders, and particularly those with strategic ownership interests. As such, the bidding process ensured a competitive and transparent process, while, at the same time, preserved the value of the assets and their economic importance.
The process included two separate phases, aimed at achieving the goals outlined above. Phase one – which took more than six weeks – began with extensive market consultations, which involved a wide range of potential strategic investors. The initial consultation process identified 54 entities potentially interested in the privatisation, with 33 entities gaining access to the relevant documentation in order for submitting a non-binding offer. In all, eight non-binding offers were received, three from single entities and five from consortia.
Five interested parties were then selected to participate in phase two, by submitting binding offers within a time frame of four weeks. In this second phase, the interested parties were given access to more detailed information and were able to have individual meetings with the government advisors and the company management. Potential bidders were also allowed to visit the airport infrastructures. At the end of phase two, four binding offers were submitted, one from a single entity, and three from consortia. The fifth potential bidder withdrew its offer.
Selection of the winning bidder
The choice of the winning bidder was based on selection criteria set out in the Terms of Reference, which included (without limitation) the maximisation of the revenue arising from the privatisation. It also included the quality of the strategic plan for the company, aiming to reinforce the growth potential and efficiency of ANA and therefore, increasing its competitive position and the long-term value of the airports. The final point included in the Terms of Reference is the minimisation of the Portuguese state’s exposure to risks related to the implementation of the privatisation procedure, notably by ensuring that its framework fully protects the national interest and maximises revenues.
ANA then assessed the four binding bids on its suitability, particularly in relation to its technical and strategic components, with a view to achieving compatibility with the company’s strategic interests and future development. Parpública, the state’s holding company which owned ANA, drew up a reasoned report assessing each of the four bidders, taking into account the aforementioned assessment from ANA.
Parpública and ANAs reports were sent to a special monitoring committee set up to oversee the privatisation process. The committee then issued a reasoned opinion on the regularity, impartiality and transparency of the process, and concluded on its appropriateness.
After analysing the referred two reports and the reasoned opinion issued by the special committee, the Portuguese government chose Vinci as the winning bidder. The final price of €3.08bn offered by Vinci was higher than the pre-sale estimate given by the independent consultant and 26 percent higher than the offer of the second highest bid. The highest bidder also offered the best strategic project.
[E]ven in times of crisis, Portugal remains appealing to business investments and is capable of attracting foreign investors
Indeed, the superior quality of the strategic plan submitted by Vinci, currently documented in The Framework Agreement signed between the parties, will allow ANA to expand its activities and to develop the airports of Lisbon, Porto, Faro, Madeira and Azores, and will therefore contribute to the development of each of the regions served by those infrastructures. The Framework Agreement also ensures the endurance of ANAs corporate identity and the preservation of the value of its assets, including the Portuguese Hub, as a key link between Europe, South America and Africa.
Moreover, the integration of ANA in the Vinci Group will not only promote job creation but also constitutes a major opportunity for projecting Portuguese know-how and capabilities of ANAs technicians, internationally recognised by all stakeholders in this market. For Vinci Group, this transaction was also a milestone, since ANA became the major airport manager of its portfolio, permitting Vinci to gain critical mass in this sector to foster its activities as a world reference player.
Creating solid aviation management
Recognising the openness and transparency of the privatisation process, the EC has given the green light to ANAs sale to Vinci. This is referenced in the ECs statement, where “The Commission concluded that the negotiation process used by Portugal was open and transparent, and the eligibility criteria in effect were not discriminatory as regards clauses on company operational scale and track record in airport management,” before stating that the “proposal accepted from Vinci was the best proposal received and clearly exceeded the evaluation of the assets made by an independent entity prior to the sale.
It should also be noted that all documents relating to this process were submitted by the government both to the special monitoring committee and to the Portuguese Court of Auditors, in order to allow those entities to validate the regularity, impartiality and transparency of the process.
Therefore, it is the Portuguese government’s strong belief that the privatisation of ANA, together with the new regulatory framework and the concession agreement in place, will boost ANAs economic growth and increase its efficiency and competitive position in the European and global aviation market, for the benefit of the civil aviation sector, tourism, the users of the national airport infrastructures and the Portuguese economy as a whole.
Portuguese privatisation programme
It is worth mentioning that ANAs transaction was not the only well succeeded deal undertaken by the Portuguese government during the Assistance Programme. Actually, so far the government has completed seven privatisations in utilities, health, airport operations and postal services, amounting to more than €8bn.
It has undertaken the sale of 21.35 percent plus 4.14 percent stakes in EDP (a leading Portuguese power company), 40 percent in REN (the gas and electric grid operator), one percent in GALP (a leading Portuguese oil and natural gas integrated operator), 100 percent of CGD Saúde (a leading private health player in Portugal), 100 percent of ANA, 70 percent in CTT (a leading Portuguese postal services provider), and 85 percent in Caixa Seguros (a leading Portuguese insurance company).
The particular benign conditions in which all these transactions took place, regarding favourable pre-requisites and specific regulations, permitted the price to be maximised in all cases. The diversification of strategic investors set forth the interest and confidence in the Portuguese companies and in the Portuguese economy.
Other transactions are being prepared by the government in order to continue to foster the competitiveness, transparency and growth of the economy. The openness of the Portuguese economy is a proof of its strength in the global markets and of the competitiveness of its companies.