China Investment Corp buys into Heathrow Airport parent FGP Topco

China Investment Corp seeks to boost returns with stake in London hub amid global slowdown

PUBLISHED : Friday, 02 November, 2012, 12:00am
UPDATED : Friday, 02 November, 2012, 5:30am

China's sovereign wealth fund bought 10 per cent of London's Heathrow Airport from investors, including Spanish builder Ferrovial, as the fund seeks to boost investment return amid a global economic slowdown.

China Investment Corp, which helps China manage the world's largest foreign-currency reserves, paid Ferrovial £257.4 million (HK$3.21 billion) for a 5.72 per cent of Heathrow parent company FGP Topco, the Madrid-based company said on Wednesday. The US$482 billion fund also added shares from other investors, bringing its total holdings of the hub to 10 per cent, according to the statement.

"We will continue to work with the new shareholders and with existing shareholders" to maintain Heathrow's rank "as one of the best infrastructure assets in the world," Ferrovial chief executive Inigo Meiras said.

CIC posted a 4.3 per cent loss on its overseas investments last year, its worst performance since the Beijing-based company was set up in 2007, as declines in global commodity prices roiled the value of its resources-heavy portfolio. The weak recovery in the global economy is posing a challenge to overseas investments, CIC's executive vice-president Fan Yifei told a seminar in Tsinghua University in Beijing.

CIC had taken a "flexible" approach in its investments abroad such as by taking minority stakes in target companies amid rising wariness over foreign acquisitions by Chinese firms, he said. Two calls to CIC yesterday went unanswered. Chinese companies should avoid "a headlong rush" to acquire foreign assets as it could stoke suspicion in the countries they invest in, Fan said.

CIC's board requires a 10-year annualised investment return ratio to be three percentage points higher than inflation in G20 countries excluding China and the European Union, according to Fan.

The fund could tolerate short-term volatility in its investments because dividends from Chinese lenders were enough to cover its interest payments from a bond sale for now, Fan said.

CIC owns Central Huijin Investment, which controls the nation's biggest banks. Ferrovial agreed in August to sell a 10.6 per cent stake in Heathrow to Qatar Holding. Ferrovial, controlled by the family of chairman Rafael del Pino, was seeking to diversify assets, Meiras said.