The parent company of London Heathrow Airport has a new investor, which is sure to be a bit controversial…
In this post:
Saudi Arabia’s PIF buys 10% stake in Heathrow
Saudi Arabia’s Public Investment Fund (PIF) has today announced that it has entered into a share purchase agreement to acquire a 10% stake in TopCo, the holding company of Heathrow Airport Holdings. This deal is subject to regulatory approval.
The stake is being purchased from Ferrovial, as the company is totally divesting its 25% stake in Heathrow Airport’s parent company. The company is also selling a 15% stake to French private equity firm Ardian, through its infrastructure funds. Up until 2013, Ferrovial owned a 56% stake in the airport’s parent company. The 25% stake is being sold for a total of £2.37 billion.
PIF states that it’s “pleased to be investing in Heathrow, a world-class airport, which acts as a key gateway to the world,” and says that the investment is “in line with its strategy to support the business as a long-term partner.”
Saudi Arabia’s PIF has been getting a ton of publicity in recent years, and is one of the world’s most active sovereign wealth funds, with more than $700 billion in assets. The intent of the fund is to diversify Saudi Arabia’s economy, though it’s pretty clear that many of the investments are also about soft power abroad, as well as making Saudi Arabia more mainstream. That’s especially true when you look at the PIF’s investments in sports like golf and soccer.
Heathrow Airport also has investments from Qatar & China
Saudi Arabia isn’t the first country to use its investment fund to buy a stake in Heathrow Airport. As it stands, the Qatar Investment Authority owns a 20% stake in the airport’s parent company. Assuming this deal is approved, Qatar will be the airport’s single biggest shareholder, replacing Ferrovial in that position.
Furthermore, the China Investment Corporation owns a 10% stake in TopCo. So when all is said and done, 40% of Heathrow Airport will be owned by Qatar, Saudi Arabia, and China.
When I write about airlines like Qatar Airways, Saudia, etc., some people chime in and say “you should boycott these airlines, they’re just arms of their governments, and you’re financially supporting them.” While I can appreciate that sentiment and see where people are coming from, I think investments like this also expose the complexity of taking such a stance.
When you fly British Airways out of Heathrow, you’re paying fees to an airport owned by Qatar, Saudi Arabia, and China, and you’re flying an airline that Qatar Airways has a 20%+ ownership stake in, making Qatar Airways the biggest shareholder of International Airlines Group (IAG).
If you think it’s unethical to fly with Qatar Airways, do you think it’s also unethical to fly out of airports and with airlines that are owned by the same company? There’s no right or wrong answer to this, but I do think some people try to oversimplify this.
Saudi Arabia’s Public Investment Fund is buying a 10% stake in TopCo, which is the parent company of Heathrow Airport. I think what’s most interesting about this development is that the airport is now 40% owned by the governments of Qatar, Saudi Arabia, and China.
What’s your take on Saudi Arabia’s investment in Heathrow Airport?