Saudi Arabia’s Public Investment Fund (The PIF) has agreed to acquire a 10% stake in the United Kingdom’s Heathrow Airport from its holding company, TOPCO. This strategic move is part of PIF’s broader investment strategy to expand its influence in the global aviation sector as well as boost Saudi tourism globally.
Saudi Arabia’s Public Investment Fund (PIF), one of the world’s largest sovereign wealth funds with over $770 billion in assets, continues to make strategic moves in global aviation. This time, the focus is on London Heathrow Airport, one of the busiest hubs in Europe.
A Thriving Partnership
The PIF has announced a share purchase agreement from Ferrovial SA to acquire a 10% stake in FGP TOPCO, the UK-based Heathrow Airport Holdings Ltd holding company.
This move is part of PIF’s broader strategy to support its business portfolio as a long-term partner, as the state news agency, Saudi Press Agency (SPA) reported.
In this deal, the PIF is not alone. Ardian, a Paris-based private equity firm, will acquire an additional 15% stake in FGP TOPCO. The transaction is subject to regulatory approval and existing shareholder rights.
The Strategic Rationale
The decision to invest in Heathrow Airport aligns with PIF’s strategy of diversifying its portfolio and building a solid investment base in major global industries. This investment in one of the world’s busiest airports is a testament to PIF’s long-term vision.
Heathrow is a significant destination for flights from the Gulf region, with Saudia, Emirates, Qatar Airways, Etihad, and Gulf Air serving the hub with multiple daily flights. Saudi Arabia is also expanding its airline industry, aiming to attract more business and tourism visitors
The creation of Riyadh Air, a new airline operating alongside the existing flag carrier Saudia, is part of this expansion strategy. The PIF is also investing $50 Billion in the new King Salman International Airport in Riyadh and numerous new luxury tourist destinations, including NEOM and the Red Sea project.
The Prospects Moving Forward
PIF’s investment in Heathrow comes when air traffic has rebounded following the decimation caused by the Covid-19 pandemic. The Spanish company Ferrovial, selling its stake in Heathrow, is burdened with over £14 billion of debt. Despite this, Heathrow narrowed its losses over the first nine months of this year.
The Heathrow deal is subject to approvals and the rights of existing shareholders to join the transaction as sellers or buyers under a prior shareholder agreement.
However, should the deal proceed as planned, PIF and Ardian would join existing owners, including Qatar, which holds a 20% stake, and smaller investors like Caisse de depot et placement du Quebec, Singapore’s GIC sovereign wealth fund, and Alinda Capital Partners of the US.
A Strong Track Record
The fund is part of a consortium that bought Vodafone Group Plc’s towers unit in 2022 and aims to reach $2 trillion in assets by 2030. This would make PIF the world’s biggest wealth fund, overtaking Norway’s oil fund.
The PIF has a strong track record of strategically investing in various sectors, from technology to entertainment and sports.
In the sports sector, the PIF recently launched SRJ Sports Investments, a company that aims to support the growth of sports in the kingdom and abroad by creating and hosting major global sports events.
Meanwhile, PIF’s growing interest in the automotive sector has let The PIF increase its stake in the British Luxury Car maker Aston Martin to 20.5% via Lucid Motors, boosting its economic diversification efforts and supporting Aston Martin to produce high-performance electric vehicles from 2025.
As PIF diversifies its portfolio and makes strategic investments, it solidifies its position as a global powerhouse. This investment in Heathrow is a testament to the fund’s long-term vision and commitment to supporting its business portfolio as a long-term partner.
The Heathrow deal is a significant move for PIF in the global aviation industry, and it holds the potential for further strategic collaborations that may reshape the landscape of international air travel.
Saudi Arabia’s Public Investment Fund’s decision to invest in Heathrow Airport represents a strategic move in the global aviation industry. It showcases the fund’s long-term vision and commitment to supporting its business portfolio.
As PIF continues to make such strategic investments, it further solidifies its position as a global investing powerhouse. This investment holds the potential for reshaping the landscape of international air travel, setting the stage for exciting developments in the future.