After dominating the golf world and placing itself at the top of a new Premier League football power, Saudi Arabia now looks set to take control of another Western asset: Britain’s busiest airport.
The Sunday Times from London reports that the Saudi Investment Fund and private equity group Ardian are in the process of taking majority control of London Heathrow Airport after the pair bought up the shares of infrastructure giant Ferrovial in an outrageous deal last month.
Ferrovial, Heathrow’s former majority shareholder, announced in November that it had agreed to sell its 25% stake in Heathrow for £2.4 billion ($3 billion), with 15% going to Ardian and 10% to Saudi PIF . The deal valued the airport at £9.5 billion ($12 billion).
It marks a significant upgrade from the airport’s last known valuation, when pension fund USS bought a 9% stake in 2013, giving Heathrow an implied value of £4.5 billion ($7.3 billion).
Now the Time reports that the deal for Ferrovial is seen by its remaining shareholders as almost too good to be true, and many appear eager to sell out.
The PIF and Ardian did not immediately respond Fortune’s request for comment.
Under the terms of Heathrow’s shareholders’ agreement, Ardian and the PIF are obliged to buy the shares from other shareholders at the same valuation as the Ferrovial deal, if requested.
“At that price we are a seller,” an unnamed source told the newspaper Time.
Shareholders at Heathrow include the sovereign wealth funds of China, Qatar and Singapore, as well as the major Australian and Canadian pension funds in addition to USS.
The Time reports that while the sovereign wealth funds may decide to hold on to their holdings, the rest are keen to sell at the high figure. That would give Saudi Arabia and Ardian a 60% stake in the airport.
Saudi influence is growing
Reports that Saudi’s $700 billion PIF is taking joint control of Heathrow Airport mark the sovereign wealth fund’s latest major investment in Western assets, part of Saudi Arabia’s plan to diversify its economy away from its dependence on oil.
The PIF took ownership of Newcastle United in October 2021 following a controversial takeover, and the country plans to host the FIFA World Cup in 2034. The group later founded the LIV Golf Tournament, poaching major stars in billion-dollar deals before merging with the PGA.
Critics have described these ventures as “sportswashing” projects, accusing Saudi Arabia of using the soft influence of sport to evade scrutiny of the country’s human rights and environment.
The country’s influence is not only limited to investments in sports projects. The PIF agreed to acquire Standard Chartered’s aircraft leasing business for $3.6 billion in August, while in September it became the largest shareholder of Spanish telecoms giant Telefónica in a $2.3 billion deal.
The takeover of Heathrow Airport would raise further questions about Saudi Arabia’s influence over key Western infrastructure.
however, the Time reported an unnamed source at the PIF-Ardian consortium that the pair would operate independently and keep their interests in the airport separate. The source, on the other hand, admitted that PIF is a limited partner investor in Ardian’s investment funds.
Despite inevitable speculation about the strategic motivations behind owning the majority of Heathrow Airport, it is seen as an attractive long-term investment prospect for sovereign wealth funds.
The company makes money from landing fees against airlines, set by the British Civil Aviation Authority (CAA). These charges pay for infrastructure costs, giving the airport the status of a lucrative passive investment.
Heathrow is trying to expand with a third runway, although it has waged a protracted regulatory battle in an attempt to push this through. Traffic at the airport remains below 2019 levels.