Saudi Arabia poised to take control of Heathrow Airport – The Post


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The Saudi sovereign wealth fund (PIF) will in the coming days complete the purchase of 25 percent of the shares of the company that controls London’s Heathrow airport, one of the busiest in the world. At the end of November, the fund and the French investment company Ardian, financed in turn by Saudi Arabia, reached an agreement to buy the shares of the Spanish company Ferrovial at a price of 2.8 billion euros, which is well above their value. According to several newspapers, other companies that have stakes in the airport are also ready to sell them to the Saudi sovereign wealth fund.

The Public Investment Fund (PIF) is worth over $700 billion and is the main tool at Prince Mohammed bin Salman’s disposal to implement his plan for economic growth and development, which would gradually free Saudi Arabia from its dependence on oil and provide it with an increasingly important role in the sectors of technology, healthcare, tourism and of course sports. It seeks to do this through investments in many different industries and around the world.

The PIF was established in 1971 to invest large surpluses of public money accumulated through the oil industry. It is a sovereign fund, i.e. an investment fund owned by the state and invests public money in financial instruments such as shares or bonds or in real estate. It is usually the richest countries that have sovereign wealth funds, such as those that export natural resources and oil: these countries collect all fiscal surpluses, that is, tax surpluses that are usually very high, in a fund and use them to invest in various activities. .

The Saudi fund has invested heavily in local businesses such as banks, construction companies, energy companies (including Saudi Aramco), telecommunications companies, ports, tourism infrastructure and so on. However, one sector on which it has a lot of focus is air transport: for example, it recently opened the airline Riyadh Air to boost the flow of tourists to the country.

The Saudi government’s goals also include increasing tourism’s share of GDP generation to up to 10 percent by 2030: this is not only an ambitious goal, but perhaps unrealistic, given that it is a predominantly desert country and, on average, the share is much lower in countries with a strong tourist focus (e.g. in Italy tourism is worth 6 percent of GDP).

When PIF and Ardian complete the purchase of Ferrovial shares, they will have 25 percent of the airport against 20 percent of Qatar Investment Authority, 12.62 percent of Canadian pension fund Caisse de dépôt et placement of Quebec, 11.2 percent of Singapore’s sovereign wealth. the GIC fund, 11.18 per cent from the Australian Retirement Trust and 10 per cent each from the China Investment Corporation and the Universities Superannuation Scheme.

According to Times, who consulted sources inside the companies, the sovereign funds of China, Qatar and Singapore should keep their shares, while other investors could sell them: in that case, the Saudi sovereign fund and Ardian would have almost 60 percent. The agreements in place between the airport’s shareholders allow the shareholders to sell the shares at the same value set by the agreements between PIF, Ardian and Ferrovial. The 2.8 billion euros provided by Saudi Arabia for a 25 percent stake raised the airport’s value to just over 8.2 billion euros, more than double what it had previously estimated.

– Read also: What is a “Saudi Sovereign Wealth Fund”


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