French airports operator Groupe ADP is to establish a new airport holding company with the Indian firm GMR Enterprises, simplifying the structure of its current Indian venture through a merger arrangement.
GMR is the 59%-owner of GMR Airports Infrastructure – known as GIL – which, in turn, has a 51% share in GMR Airports, known as GAL.
Groupe ADP holds the 49% balance of GAL.
Under the proposal GAL and GIL would be merged in the first half of next year, forming an airport holding company which is listed on Indian stock exchanges.
This merged entity – which would be called New GIL – would be 33.7%-owned by GMR, and 32.3%-owned by Groupe ADP, with the rest publicly-held.
But Groupe ADP would have a 45.7% economic interest in New GIL, against GMR’s 27%, and the public’s 27.3% if optionally convertible preference shares are taken into account. This will allow Groupe ADP to retain a “substantial interest” in the performance of the asset, says the company.
Groupe ADP states that the proposal will “simplify and clarify” the capital structure of the airport holding company and, with New GIL, create a “more agile” development platform.
The transaction would also “reveal the value” of Groupe ADP’s stake in the Indian company, says chief executive Augustin de Romanet, three years after the French company’s acquired its interest in GAL.
“This operation will enable us to fully seize the development opportunities of the Indian airport market in the coming years,” he adds.
Creditors and shareholders of GAL and GIL have yet to approve the proposal, which is also subject to regulatory clearance.
Groupe ADP stands to benefit from full settlement of contractual clauses in its original GAL acquisition deal.
It also points out that GIL, despite exclusively having airport assets on its balance sheet, has continued to carry residual contingent non-airport liabilities.
These liabilities would be substantially reduced under the merger. New GIL would be an “airport pure-player”, says Groupe ADP, and allow the French firm to become a shareholder of the listed entity with “no exposure” to the liabilities.
Groupe ADP is proposing to “accelerate” the settlement of these liabilities by subscribing to foreign currency convertible bonds totalling €331 million ($354 million).
GAL’s assets in India include Delhi, Hyderabad and Goa airports as well as facilities in Indonesia and a number of projects both in India and Greece.
“Potential for external growth in Asia is important, driven by the need for airport infrastructure investments in the region,” says Groupe ADP.
“In India, in particular, privatisation projects have been announced by the government. To fully exploit those growth opportunities, the merger of GAL and GIL would allow New GIL to form a more agile platform able to capture this profitable development potential.”
