Melbourne-based private equity firm Industry Funds Management (IFM) has revealed that it will take a 35.5 percent stake in British airport operator Manchester Airports Group (MAG), after MAG revealed that it has won its bid for London Stansted Airport for £1.5 billion (€1.8 billion; $2.4 billion).
Financial details of the deal were not disclosed, but both are expected to be completed by the end of February. The Stansted acquisition is considered part of the 35.5 percent stake, according to Kyle Mangini, Global Head of Infrastructure at IFM.
The deal was agreed on a few months ago and was subject to the successful acquisition of Stansted, Mangini said. IFM has been working with MAG for the past 18 months, according to the statement.
The equity for the deal came from IFM’s Global Infrastructure Fund, an open-ended fund which now has $5 billion invested worldwide. An undisclosed amount of debt funding was used for this transaction, but Mangini noted that it was “not aggressive”.
IFM is the largest investor in Australian airports – it holds equity interests in nine airports across the country – but this is its first investment in British airports, according to Mangini. MAG already operates three airports in the country, not including Stansted. IFM will get an undisclosed number of board seats on the company with this transaction, Mangini added.
Mangini said that the airport acquisition fits very well into the fund’s portfolio, because it is more closely tied to GDP growth. “It makes sense to buy a GDP-tied asset when GDP growth is down,” he said.
Mangini also believes the stable returns of infrastructure investments like this one are beginning to have more appeal. A number of private equity firms have been looking into the asset class, but Mangini believes it may be difficult for firms to enter infrastructure due to the comparatively lengthy holding period.
With A$39 billion (€30.8 billion; $40.9 billion) assets under management across infrastructure, private equity, debt and listed equities, IFM is wholly owned by 33 pension funds.
The firm was created through the merger of IFS Private Capital Group and Development Australia Fund Management Limited, with IFM assuming full management, according to Private Equity International’s data division.