Flughafen Wien AG (FLU) owns world-class belongings – together with Vienna Worldwide Airport, which dealt with some 32 million passengers within the 12 months previous to covid. Nevertheless it’s a unusual inventory. Roughly 40% of the corporate is owned by state and native governments in Austria. One other 10% is held in a workers belief that distributes dividends as bonuses to many of the airport’s workers. An extra 40% is owned by IFM International Infrastructure Fund (IFM). That leaves simply 10% of the corporate’s shares as free float, listed on the Vienna Inventory Alternate and obtainable to be owned by the broader investing public. Our worldwide fund is one such shareholder.
IFM is an enormous investor in infrastructure (and different belongings) on behalf of “world-leading pension funds”, a lot of it Australian business tremendous fund cash. It acquired its present stake in Flughafen Wien through takeover gives in 2014 and 2016. We purchased into the inventory later in 2016, after IFM’s second supply, eyes vast open to the illiquid nature of the funding. However month-to-month buying and selling liquidity within the inventory has greater than halved over the interval of our possession.
We’ve lengthy thought the tip sport right here was a squeeze out of minority shareholders by IFM. Coping with the liquidity challenge and defending minority pursuits is thus a very essential position for the board of Flughafen Wien. That’s a message we’ve constantly given to the board and administration, each formally and informally, stretching again at the least three years.
But right here we’re. Final week, IFM launched a compulsory takeover supply for all remaining shares in Flughafen Wien. That’s actually focused on the 10% free float solely, authorities shareholders received’t be promoting.
Insufficient value a Catch-22
The value supplied, €33 per share, is completely insufficient. It represents a a number of of barely 8 occasions earnings earlier than curiosity, tax, depreciation and amortisation (EBITDA) from 2019 (the final 12 months earlier than the Covid-19 interruptions). For reference, funds managed by the identical IFM paid 23 occasions 2019 EBITDA to amass all of Sydney Airport just lately. There hasn’t been an airport takeover transaction globally up to now decade struck at lower than 10 occasions EBITDA. Larger European metropolis monopoly airport transactions cluster round 15 occasions. A “truthful” value for Flughafen Wien shares, in our opinion, begins at about €45 per share.
Most of the minority shareholders, ourselves included, will contemplate the €33 per share supply unfair, after which give critical consideration to promoting anyway. That’s as a result of this inventory, as illiquid because it has develop into, is about to get a complete lot much less liquid as IFM soaks up extra or the entire remaining free float. It’s a Catch-22 for minorities, with IFM as beneficiary.
The administrators must do one thing about it.
Just a few concepts
There are practical avenues for a fairer final result right here. A buyback of minority shareholders’ pursuits at a fairer value by Flughafen Wien itself may make a whole lot of sense. It could preserve the present steadiness between the bigger shareholders, which could be essential to the federal government shareholders particularly. It may add important worth to their funding by means of earnings accretion and value reductions as the corporate delists. It would supply a “much less worse” value for minorities and definitely wouldn’t stretch the corporate’s steadiness sheet, which is ridiculously undergeared.
And, whereas we’re neither legal professionals nor adept German audio system, the Austrian Transformation Act (Umwandlungsgesetz) – referred to as a “squeeze out” provision – could apply. Whether or not legally required or not, exterior valuation is unquestionably greatest observe as a place to begin right here.
There’s nonetheless water flowing below this bridge. We await the board’s official response to the supply, maybe they’ll do every thing we count on of them. However we’re not ready to remind them of their obligation to make sure a good final result for all shareholders, not simply these – like IFM – with a seat on the board.
Discover beneath a duplicate of our letter to the chairman of the supervisory board of Flughafen Wien, emailed Wednesday 15 June, which additional outlines our case.
