European private equity firm PAI Partners has agreed to sell air cargo handler Swissport to China's HNA Group for CHF2.7 billion Swiss francs (US$$2.8 billion), Reuters reports.
The deal, which CargoForwarder Global reported on in our Breaking News on 17. July, is expected to be finalised around the end of the year. This marks PAI's exit from the ground handling and
cargo services company it bought less than five years ago for CHF900 million Swiss francs.
Does this deal have make economic sense?
It is common knowledge in the industry that Chinese logistics companies are trying hard to expand in the international logistics scene.
This development stems from a previous Chinese government „request“ to them to get their act together and ensure that they become part or whole owners especially at foreign airports.
This is seen as part of the Chinese governments strategy to gain more logistical presence outside of China.
So, is this move by the Hainan group one which is being promoted from within other circles?
The HNA group is owner of quite a few airlines in China, the largest being Hainan Airlines which has, if even still quite small, an international routing.
Some analysts are questioning the real value of the deal.
Their thesis is that Swissport‘s worldwide debts are greater than the value of the company at its sale price.
Whether this is fact, probably will remain a closely guarded secret.
However, considering that PAI Partners paid CHF900 million four years ago when buying the company from Ferrovial, then also invested around another CHF500 million in acquiring Servisair and allegedly had clean up costs in other areas which were rumoured to be in the half-a- billion mark; then one might want to consider putting 1+1 together.
Opening up the Chinese airport handling market
The purchase of Swissport by HNA could also be a tactical move on the part of the Chinese.
The airport handling market in this vast country has so far been more or less a closed shop.
Other worldwide airport handlers have had very little luck in getting a foothold in China in the past.
However, the Chinese authorities realize that they will have to give in sometime soon and start opening the market to one or more handlers.
Other analysts are of the opinion that by acquiring Swissport, HNA factually can put them in China, within their vast network, as the official airport handler; thereby possibly delaying or blocking the entry of other aspirants.
The deal still has to be sanctioned
It will be interesting to see how both the EU and US regulatory bodies see this deal.
There have been incidents in the past where Chinese companies have tried to become 100 percent owners of US and EU airports and where they have met with stiff objections due to the fear in some areas that passenger information which is gathered at airports could fall into the wrong hands.
Maybe an unfounded fear, but it will be interesting to see how the US political scene will or may react once it knows that one of the largest US and Canadian airport handlers, namely Swissport, is fully in Chinese hands.
Dnata the Dubai based handler certainly faced that problem when trying to buy Baltimore Port some time back. Stiff resistance came from US politicians who claimed to fear having an Arabian owner of such a strategic port.
All possibilities, but maybe it‘s just a straightforward takeover / market entry deal.
One thing is for sure, this will give Swissport the much longed for entry into the Chinese airport handling market.
Swissport is probably the largest airport handler, operating in 48 countries, generating operating revenue of CHF3 billion Swiss francs and handles 4.1 million tonnes of cargo a year.
John Mc Donagh / Nol van Fenema