France’s Macron seen launching privatisation drive with airports

The government of new French President Emmanuel Macron looks likely to start a planned privatisation programme with airports operator ADP, according to three financial industry sources with knowledge of the matter.

Macron said before he won the presidency on May 7 that he wanted privatisations to help fund a 10 billion euro ($11.2 billion) government drive to boost industry and innovation.

If he gets the parliamentary majority pollsters expect on June 18, he could go for a quick first deal that could raise funds for ailing French nuclear group Areva.

Shares in ADP, which runs Charles de Gaulle and Orly airports outside Paris, are trading near record highs, and the government’s 50.6 percent stake, worth nearly 7 billion euros, could be put on the block by state investment group APE within weeks or months of the election, the sources said.

“We think that APE have made plans so that ADP is on top of the stack for the government,” said one of the sources who has previously been involved in deals involving the French state.

None of the sources could say for sure the government would sell ADP soon, nor whether all or part of the stake would be up for auction. But a second source said APE had “very likely organised things” for ADP to be the first privatisation.

ADP, the finance ministry, the president’s office and the APE all declined to comment.

Despite its strong recent share price performance, ADP has an enterprise value (equity plus debt) of about 13 times forecast earnings before interest, tax, depreciation and amortisation (EBITDA), below an average of around 16 times for recent sector transactions.

The 2015 sell-off of Nice and Lyon airports, overseen by Macron himself as economy minister at the time, achieved multiples of 23 and 19 times respectively.

European and Chinese investors are interested in ADP, a banking source said. However, French infrastructure group Vinci , which already holds 8 percent and has made airport operation a core business, is seen as the most serious candidate, sources and analysts said.

Aside from the two Paris hubs, ADP manages or has stakes in 23 airports around the world, including in Belgium, Georgia, Turkey, Saudi Arabia, and Chile.

It said on Friday it would increase its stake in Turkish airport operator TAV Airports to 46 percent for $160 million and expand with TAV in the EMEA (Europe, Middle East and Africa) and Central Asia regions.

Through public bank Caisse des Depots and holding companies Bpifrance and APE, the state has stakes in some 1,750 French companies with a combined value of nearly 100 billion euros, of which shares worth about 77.4 billion euros were listed on the stock exchange at the end of 2016.

Investment bankers expect the sale of the state’s corporate holdings to be spread over time and that it may not be a smooth process under Macron, given his interventionist approach during previous negotiations over deals involving state.

These include the government’s surprise move to increase its stake in carmaker Renault in 2015 and a stand-off between Macron and business tycoon Martin Bouygues during talks between Orange and Bouygues in 2016.

“Macron will no doubt be more authoritarian, and will not hesitate to intervene in certain industrial situations,” a Paris-based investment banker said.

“We will not have a wave of fierce liberalism. But we will certainly have a more business-friendly government than the previous one”.

Macron has gathered a team around him that has experience in managing state portfolios. Alexis Kohler, appointed secretary general of the Elysee palace, the most powerful role among presidential staff, spent a part of his career at APE.

In the government, Antoine Saintoyant, who also worked at APE, has been named economy, finance and industry adviser to Prime Minister Edouard Philippe.

“Yes, it will be a fairly business-friendly government, but I am not sure that discussions on the next deal involving a move of headquarters out of France would be easier than they have been in the past. On the contrary!” another banker said.