Major Hungarian airport business is taking shape, with French help - news agency
The government could secure financing for the multi-billion dollar acquisition, overcoming a major obstacle to the deal, a person directly involved in the negotiations told the news agency. The suitors are aiming to reach a deal by the end of the year and negotiations are ongoing. Portfolio has already reported about Vinci's interest in the transaction.
Vinci would operate the airport and acquire a significant minority stake of up to 49%, the person said, warning that no agreement had yet been reached and negotiations could still fail.
In an unsuccessful attempt to sell Budapest Airport in 2021, the company was valued at around €4.4 billion ($4.7 billion) including debt. Also in 2021, Deutsche Bank's fair value estimate was €4.2-5.2 billion. In early September we estimated the current market value of the airport, and based on the major airport acquisitions of the last 10 years, we came to the conclusion that an EV/EBITDA multiplier of around 20 seems fair pricing.
Based on various calculations, the company is valued at €2-3.4 billion, much lower than the indicative offer of €4.4 billion two years ago or the €4.2-5.2 billion in Deutsche Bank's analysis. If we take pre-Covid EBITDA in 2019, we get an enterprise value of €2.7-4.6 billion, with the upper end of the range already close to the indicative price of €4.4 billion that was discussed two years ago and Deutsche Bank's fair value estimate at the time.
However, Budapest Airport stressed it was committed to Hungary and it wouldn't sell cheap. The sector's most recent major transaction was the acquisition of Sydney Airport in 2022, which was completed at a 22x EV/EBITDA ratio. And it wasn't the most expensive acquisition in recent history, with London Airport selling for 28 times EV/EBITDA in 2016, so there are examples of higher pricing. In light of this, a purchase price of €5.0-6.5 billion would not be such a massive surprise, either.
The Hungarian state was seeking to buy a 51% stake in the airport, with the remainder to be taken over by an operator. Vinci operates more than 70 airports worldwide, including Gatwick in London, Lisbon and Belgrade in Serbia, according to its website.
Other potential partners have also been mentioned, with Prime Minister Viktor Orbán telling Bloomberg earlier this year that Qatar was one of them.
AviAlliance, the operator and largest shareholder of the Hungarian airport, had not originally planned to sell the airport. Bloomberg stressed that it entered the negotiations after a staunch attempt by the government. The government argues the current operator has not invested enough resources in developing the airport.
The airport operator declined to comment on the negotiations. The Ministry of Economic Development, which is involved in the Budapest Airport negotiations, also did not respond to Bloomberg's request for comment. A Vinci representative also declined to comment.
Bloomberg pointed out that on Friday, Hungary sold its 15% stake in the local unit of Erste Group Bank for HUF 87.6 billion ($248 million) as part of efforts to raise funds for the purchase of the airport.
Hungary plans to finance the purchase of the airport from asset sales, budget revenues and a state bank loan, Economic Development Minister Márton Nagy told Bloomberg last month. The privatization of the airport began in 2005 and the Hungarian government sold its remaining stake in 2011. The concession contract runs until 2080.
Budapest Airport is ranked 39th busiest airport in Europe, with a traffic comparable to Edinburgh, Scotland, according to Flightsfrom.com, which tracks airline routes and schedules. Traffic was up 27% in the first half of the year, and about 10% below pre-coronavirus levels in 2019.
Cover photo: Matthew Horwood/Getty Images
