Ferrovial sells Swissport to private equity firm

Spain’s Ferrovial has stepped up its debt-reduction efforts by agreeing to sell Swissport, one of the world’s biggest airport ground handling services providers, in a SFr1.22bn ($1.25bn, €888m) deal with PAI, the French private equity firm.

Swissport, the former subsidiary of Swiss flag carrier Swissair, was bought by Ferrovial for €646m five years ago. It handles airport functions such as check-in and security services for 70m passengers and 2.8m tonnes of cargo a year in 177 airports.

The deal will provide Ferrovial with about SFr900m of cash, helping to reduce its €20.5bn debt pile. The Madrid-listed construction and infrastructure group is also selling part of its controlling stake in BAA, the UK airport operator.

Ricardo de Serdio, head of PAI’s Madrid office, said: “The sector as a whole did suffer from a drop in the volumes of airport traffic over the last few years, but Swissport continued to grow profitability. Also the global trend is still positive and cargo and passenger numbers are starting to pick up again.”

He forecast that the airport ground handling market would grow at 5-6 per cent a year, adding that there was a growing trend for airlines and airports to outsource services, such as equipment and aircraft maintenance.

PAI, which was advised by Citigroup, is yet to finalise the financing package for the deal. To maintain secrecy on the deal, the buy-out firm was only allowed to talk to two banks during negotiations by Ferrovial, which was advised by Société Générale.

Swissport, which has 33,000 employees in 38 countries, generated revenue of SFr1.7bn last year. Its operating profits continued to grow through the economic downturn, thanks to cost-cutting and disposals of lossmaking units by Ferrovial.

“Swissport’s good results and track record have attracted investors interest, offering an opportunity to execute this transaction as part of our asset rotation strategy,” said Iñigo Meirás, chief executive of Ferrovial. “The proceeds from the Swissport sale will be invested in new infrastructure and services projects.”

PAI was an under-bidder when Candover bought Swissport from Swissair in 2002. It is paying 7.4-times the last 12 months’ earnings before interest, tax, depreciation and amortisation for the company, lower than most deals in the sector.

The deal is the second airport-related investment by PAI in as many weeks, after it agreed to buy a 50 per cent stake in the Nuance Group, an operator of 370 duty free stores in 19 countries, in a deal worth €106m.

The French private equity group has agreed three deals since it was forced to cut its €5.4bn fund in half due to the departure of its top two executives last year. It is expected to be left with about €1.2bn still available for new deals.