Ardian interested in Ferrovial’s Heathrow stake; UK mid-market topping pre-pandemic volumes, finds KPMG

Infracapital invests in UK tech-enabled sustainable energy firm GRIDSERVE.

Morning Eurohubsters, Craig McGlashan here with the Dealflow.

There’s lots to talk about here in London, with a potential private equity bid for a 25% stake in Heathrow Airport and data showing that UK mid-market activity was above pre-pandemic levels in the first half of the year.

Taking flight. Anyone living in the UK will have been well aware of the myriad of problems at Heathrow this year – cancellations, long queues and caps on flight numbers. Why this has been happening is a matter of some debate that I don’t want to get into (here’s the Guardian’s summary from a few weeks ago if you’re interested). But whatever the reasons, it looks like Madrid-based transport infrastructure firm Ferrovial, which owns 25% of Heathrow, has had enough.

The firm is holding preliminary talks with external advisers about its holding, “amid interest in Ferrovial’s stake from private equity firm Ardian, which has held talks with its own advisers on a possible joint proposal with Saudi Arabia’s Public Investment Fund”, reported Reuters on Tuesday.

Ferrovial’s stake in Heahtrow is worth about €1.6 billion, according to Citi analysts cited in the Reuters report. But using transaction multiples applied to the sales of Luton and Gatwick airports, the Spanish firm could sell for €2.9 billion to €3.5 billion, the analysts added.

Healthy flow. Away from headline grabbing deals like Heathrow, the UK mid-market is also in rude health, according to a report from KPMG this morning.

Deal volumes and values dropped in the first half of 2022 compared to the post-lockdown surge of 2021, by 19 percent and 16 percent respectively. But the 391 deals completed was 44 percent higher than the same period in 2019, while the aggregate deal value of £22 billion was 26 percent higher.

Bolt-ons proved particularly popular. They accounted for 62 percent of all mid-market deals, which KPMG said was a record proportion for a half year period. The aggregate value in the first half of the year was £12.7 billion, “notably higher” than levels in 2018 and 2019, the report said.

“At first glance, the decline of both deal volumes and values in the first half of 2022 could be negatively perceived,” said Jonathan Boyers, head of KPMG’s UK corporate finance practice. “Yet, the overall picture is a positive one. Putting the unexpected spike in activity during 2021 and in the final quarter of 2020 to one side, both mid-market deal volumes and values in the first half of 2022 exceeded those achieved before the pandemic occurred.

“Positive mid-market activity was driven considerably by fears of a probable capital gains tax increase in early April, that caused dealmakers to push deals through before the anticipated change. We have also observed a growing number of business owners de-risk their personal asset portfolio as the UK slowly emerges from the pandemic and the general outlook improved.”

Sun-to-Wheel. The KPMG report came a couple of days after Infracapital announced on Monday it has made a £200 million ($242 million; €237 million) growth investment in GRIDSERVE, headquartered in Iver in the UK.

GRIDSERVE is a tech-enabled sustainable energy business. GRIDSERVE’s Electric Highway is a national public charging network covering 85% of the UK’s motorway service areas and select retail destinations. The investment from Infracapital is to support GRIDSERVE’s Sun-to-Wheel model, which encompasses generating energy through hybrid solar farms for its network of electric forecourts and electric hubs.

“GRIDSERVE is leading the charge in the decarbonisation of the UK’s transport system and is led by an experienced management team that has already made great progress in expanding GRIDSERVE’s platform,” said Andy Matthews, head of greenfield at Infracapital. “We look forward to working with the GRIDSERVE team as the business moves into this next phase of growth.”

Infracapital joins existing investors Mitsubishi HC Capital UK and TPG Rise – TPG’s global impact investing platform. Both have also increased their shareholding in the company as part of the deal.

Open wide. The second half of the year for UK mid-caps also seems to be trundling along, with my colleague David Wansboro reporting yesterday on a recent mid-cap bolt-on.

London-based TriSpan’s portfolio company Real Good Dental (RGD) announced on 4 August that it has bought the Enamel Dental Group, marking RGD’s move into England.

The Enamel Dental Group is a dental group comprising 68 surgeries within 18 trading practices across the UK that has grown rapidly through a focused acquisition strategy. The group, headquartered in London, was established in 2017.

RGD is headquartered in Edinburgh and has been a TriSpan portfolio company since June 2021. TriSpan made an initial investment in the company with the backing of Keyhaven Capital.

“We are very proud to welcome the Enamel Dental Group into the RGD family and are looking forward to working with their teams in continuing to develop Enamel and the wider group,” said Fady Michel Abouchalache and Joseph-Patrick Dib, partners at TriSpan.

Ferried out. Away from the UK, CapMan Infra announced on Tuesday that it has exited Norwegian marine transportation company Norled. CBRE Investment Management has bought CapMan Infra’s 50% stake. CBRE and CapMan each acquired a 50% stake in Norled in 2019. The exit is the first from the CapMan Nordic Infrastructure I fund.

Norled is one of Norway’s four leading marine transportation companies. It has a fleet of 41 ferries and 30 express boats and has been investing in new types of vessels and eco-friendly technologies.

Stavanger-headquartered Norled has invested approximately €250 million into renewing its fleet since 2019, decreasing CO2 emissions by 30% from 2019 to 2021. The number of low and zero emission vessels in the company’s fleet has grown from two to 18.

”Since acquiring the company, we have established Norled as a successful stand-alone business by strengthening the management team, organisation and tendering capabilities, while investing significantly into decarbonisation of the fleet,” said Ville Poukka, managing partner at CapMan Infra.

That’s it from me – speak to you on Thursday.