Argentine Airport Operator Plans IPO to Fund Expansion

Corporación América

Corporación América controls the new international airport in Natal, Brazil. The company is preparing an initial public offering. Corporación América

Skift Take: It’s a foreign concept in the United States, where local bureaucrats generally run airports. But elsewhere, airports tend to be privately managed. Often that makes them more nimble. They can also be profitable, as this proposed IPO suggests.

— Brian Sumers

When the bell sounds in New York later this month for the initial public offering of Eduardo Eurnekian’s airport business, the man ringing it will probably be his nephew Martin Eurnekian.

It will be more than a symbolic move. The share sale represents a key milestone in the Argentine mogul’s long and varied career, as he passes the baton of his billion-dollar business to his chosen successor.

“I am doing this IPO, but that doesn’t mean I’m in charge — the one who manages the airports is my nephew,” Eduardo Eurnekian said during an interview in his Buenos Aires office. “I will oversee this deal this month, and my career in airports will be complete.”

Eurnekian’s closely held Corporacion America Airports SA, which owns concessions to operate 51 airports worldwide, is looking to sell as much as $750 million of shares in the last week of January. It will be the first IPO by an Argentine company this year.

It will also mark the start of a new phase for Eurnekian, though the 85-year-old entrepreneur — who says he still swims and practices yoga every day — won’t be retiring out of sight. The son of Armenian immigrants who fled the genocide in the early 20th century said that handing over day-to-day operations will free him up to explore new areas of business.

Putin, Maradona

In an interview in his office, surrounded by photographs of himself with a spectrum of people he’s met throughout his career — from Russian President Vladimir Putin to soccer star Diego Maradona, Pope Francis and Buenos Aires province Governor Maria Eugenia Vidal — Eurnekian spoke of his interest in biotechnology, cattle, agriculture and renewable energies.

Eurnekian knows change. His Palermo neighborhood office is located in what was once his textile factory. Later it became his media headquarters, when he left the clothing sector to reign in cable television, before the airport business propelled him to his greatest success. That’s still where he sees the most room for growth.

The key to his success in the sector, Eurnekian said, was finding a niche in the operation of medium-sized airports that didn’t appeal to larger rivals such as Aeroports de Paris, LHR Airports Ltd. and Fraport Frankfurt Airport Services Worldwide.

Eurnekian said he believes more profits can be squeezed from the airports he already operates by either expanding their capacity or providing retail and entertainment options for travelers. That could mean adding stores, restaurants and other services, as the company plans to do at Ezeiza airport in Buenos Aires, or by increasing their size through building new runways, as the company plans to do in Florence, Italy.

“The future will be airports with more space, such as in Mumbai, or airports with more services, such as is the case of Florence, where we will add more hectares in order to incorporate services, shopping malls and offices,” he said. “Today air passengers are growing at double the rate of gross domestic product, and in some regions as much as three times — and I charge by the passenger.”

The core of Eurnekian’s business that generated $1.2 billion in the first nine months of 2017 is in Argentina. Aeropuertos Argentina operates 36 airports in the country, handling more than 90 percent of the country’s total passenger traffic.

Healing Rift

Eurnekian named nephew Martin, 39, chairman of Aeropuertos in April, replacing Rafael Bielsa, a former foreign minister under ex-President Cristina Fernandez de Kirchner. Transport Minister Guillermo Dietrich acknowledged in November that Martin’s appointment helped heal a rift with President Mauricio Macri’s government and persuaded Macri not to exercise an option to terminate the concession early.

Eurnekian was initially skeptical of Macri’s reform agenda. Now he’s more optimistic, saying he thinks Argentina has great potential even if he believes dismantling 80 years of protectionist policies will take some time.

“We isolated ourselves and wanted to believe we were the best, and the day we took our head out of the sand we realized we’d fallen from 12th place to 80th,” he said. “This government is a step forward. There are people that have another vision of the world, that are looking for competitiveness. They haven’t still given the big step a liberal would like to see, but they’re in the right path.”

Still, Eurnekian says the reforms Macri is carrying out are more tepid than those of Brazil, its largest trade partner. He hopes the changes Brazil is implementing will push Argentina to be bolder in its attempts to make the economy more competitive.

‘Trust Me’

At least a portion of the proceeds of the Corporacion America share sale will be used to lead the expansion of the Buenos Aires airports, including building hotels. Eurnekian looks to add two in Ezeiza, the international hub that handled 7.4 million passengers in the first nine-months of 2017 and 9.8 million passengers in 2016. He also sees one hotel in Buenos Aires city airport, which will likely gain terrain by advancing over the estuary known as Rio de la Plata.

Bank of America Corp., Oppenheimer & Co., Goldman Sachs Group Inc. and Citigroup Inc. were hired by Corporacion America to help raise at least $500 million. Pension funds are the largest investors for airport stocks as flying becomes safer and cheaper, Eurnekian said.

“They buy the stocks because they trust me,” he said. “I don’t want to sound pretentious, but if they didn’t trust me, they wouldn’t be waiting with so much anticipation for the share sale.”

©2018 Bloomberg L.P.

This article was written by Charlie Devereux, Carolina Millan and Pablo Gonzalez from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

Ryan Wolkov

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Author: Ryan Wolkov

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