France’s ADP outbids Tata, GIC, SSG consortium to seal GMR Airports deal
Photo Credit: Reuters

Nearly a year after a consortium comprising Tata Group, private equity investor SSG Capital and Singapore’s GIC agreed to buy a large stake in GMR Airports Ltd, French airport operator Groupe ADP has come out of nowhere to fly away with the deal.

ADP will pay Rs 10,780 crore ($1.5 billion) for the stake in GMR Airports Ltd, parent GMR Infrastructure said in a statement on Thursday. The Indian group will retain a 51% stake and management control.

The deal values GMR Airports at Rs 22,000 crore. This is 22% higher than the valuation of Rs 18,180 crore GMR Airports got in March last year when its parent signed a deal to sell a 44.4% stake to Tata Group, GIC and SSG Capital. Last month, however, GMR had revised that deal to sell a 49% stake. The deal with ADP effectively scraps the agreement with the Tatas, GIC and SSG.

The original deal would have been the biggest private equity transaction in India’s airport sector, both in rupee and dollar terms. GIC was to put in about Rs 2,670 crore and SSG Rs 1,780 crore, taking the total PE component to Rs 4,450 crore ($646 million). This would have been higher than India-born Canadian billionaire Prem Watsa’s Fairfax investing Rs 4,258 crore, or $644 million, in three tranches in Bangalore International Airport Ltd.

The previous deal would have also allowed the Tata Group to enter the sector. However, it was scrapped likely because of a lack of government approvals, due mainly to a rule that bars airline operators from owning a stake of more than 10% in an airport company, media reports said. The Tata Group operates two airlines in India, in separate joint ventures with Malaysian carrier AirAsia and Singapore Airlines.

Under the new deal, ADP will pay Rs 9,780 crore to buy shares of GMR Airports from GMR Group and make an equity infusion of Rs 1,000 crore in the company. GMR Group will get the first tranche of Rs 5,248 crore immediately. This will help the group cut debt and improve cash flows and profitability.

ADP said in a separate statement the deal will be completed in two phases. In the first phase, it will buy a 24.99% stake in the coming days. The second phase, for 24.01%, is subject to regulatory approval, notably from the Reserve Bank of India. It will be concluded in the coming months.

GMR Airports may also receive as much as Rs 4,475 crore from ADP as earn-outs depending on achievement of operating performance metrics and on receipt of regulatory clarifications over the next five years. This remains unchanged as the earn-outs were also part of the Tata-GIC-SSG consortium’s offer.

If GMR Airports does receive the entire amount, its total post-money valuation will increase to Rs 26,475 crore.

GMR Group chairman GM Rao said that the partnership with ADP is in line with the group’s aim to become a global airport developer and that it will open newer avenues of growth.

Augustin de Romanet, chairman and CEO at ADP, said the deal will help the French group to build a worldwide network of airports. “This acquisition will constitute a growth driver in the medium term, and also a transforming position for the group in one of Asia's and the world's most dynamic and promising countries.”

GMR Airports has a portfolio of seven airports in India, the Philippines and Greece. The Delhi and Hyderabad airports in India and the Mactan-Cebu airport in the Philippines handled a total of 102 million passengers in 2019. It is developing two airports, in Goa and Greece, and recently won two others, in Nagpur and Bhogapuram.

ADP operates airports In Europe, Africa, South America and the Middle East. In 2019, it handled 108 million passengers in Paris and 110 million passengers in airports abroad.

In 2019, GMR Airports and ADP together handled a total of 336.5 million passengers, the highest across the world, the companies said.

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