Investment banks are vying to work with potential buyers or the French government on the sale of its majority stake in Aeroports de Paris (ADP) , sources close to the matter said, in one of the largest infrastructure deals expected to come to market in 2018.
ADP, which runs Charles de Gaulle and Orly airports outside Paris, is likely to be an early target in President Emmanuel Macron’s privatisation drive. The company, 50.63 percent-owned by the French state, may be valued at about 25 billion euros ($29 billion) including debt in a potential deal.
According to two sources, the state equity agency has picked Bank of America-Merrill Lynch to manage the privatisation. Another source familiar with the matter said BNP Paribas was working with ADP.
ADP, Bank of America and BNP Paribas all declined to comment. State holding company APE said it frequently seeks outside advice about its portfolio.
Several bankers said France’s Vinci, Europe’s biggest construction and concessions company, was seen as the frontrunner in any sale. Vinci already has an 8 percent stake in ADP and has publicly expressed an interest in investing more if the state decides to sell all or part of its stake.
Vinci is expected to hire investment banking boutique Lazard to advise it, four sources familiar with the matter said. A fifth source denied that Vinci had yet awarded formal mandates. Vinci and Lazard declined to comment.
Last year Vinci secured a stake in Lyon airport along with public sector lender Caisse des Depots (CDC) and it operates 35 airports worldwide. CDC, which is relatively independent from the French government, has also expressed an interest in ADP.
Vinci’s position as a current shareholder is deterring some potential buyers, sources said, adding that a structure which would make the process most competitive had not been agreed.
Pension funds and insurers are among those preparing for ADP bids as they shift part of their assets towards infrastructure investments, which are regarded as relatively safe but which also promise higher returns than government bonds.
The ADP sale could take a long time to be completed, given the complexity of its structure, and it is likely to serve as a test case for broader French privatisation policy.
A wave of consolidation among European airlines is creating pressure for the region’s airports because it gives carriers more negotiating power over their hubs.
Several sources said the stake in ADP, which has a market cap of 16 billion euros ($18.84 billion), could be too big to be sold in one go as a competitive process. One banking source said the government’s stake should be broken up into chunks to be sold off separately, while another said the company should be split into an operating and real estate arm.
Given the size of the asset, bidders are likely to form consortia. One source said he expected the sale to launch formally only in the second half of 2018 as there was too much to be sorted out before a structured process could begin.
“All large U.S., Canadian and Middle East funds will look,” he said. “It remains unclear whether France would welcome a buyer from China or the Gulf. Everybody is spending time on the subject, but hardly anyone has actually chosen an adviser already.”
ADP could be valued at around 20-25 times its expected earnings before interest, tax, depreciation and amortisation (EBITDA), in line with valuations seen in other recent airport sales. ADP’s EBITDA was 1.2 billion euros in 2016.
ADP shares traded down half a percent at 161.9 euros on Tuesday. Vinci shares were up 0.37 percent at 86.77 euros.