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IPE special report May 2018

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USS buys stake in air traffic control business NATS

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The Universities Superannuation Scheme (USS) has bought a nearly 50% stake in the Airline Group, marking further growth in its infrastructure portfolio.

The £143m (€170m) deal will see the UK’s second-largest pension fund acquire a 49.9% stake in the Airline Group and, through the stake, also a 41.9% share in NATS Holdings, the holding company for the air traffic control service.

NATS currently oversees UK and eastern North Atlantic airspace and became a public-private partnership in 2001. 

In a statement, the company said interest from the £38.6bn USS was “testament to the strength of the business”, while the fund’s head of private markets Mike Powell saw the deal as a further significant investment in high-quality infrastructure.

Powell added: “The growth of our infrastructure portfolio by our in-house team is a compelling model for the trustee board in meeting its long-term commitments to members.”

Gavin Merchant, senior investment manager for infrastructure at USS Investment Management, said NATS was a good example of where private and public ownership had worked well together to “build a national asset of strategic importance”.

“NATS is well positioned to maintain its high level of safety performance and to drive operational improvement through innovation,” Merchant said. “We look forward to working with the existing shareholders and the management team in delivering these objectives.”

USS acquired its nearly 50% stake in Airline Group from travel companies TUI Travel and Thomas Cook Group, with airlines Lufthansa and Virgin Atlantic also agreeing to part with the majority of their respective stakes in the firm.

In a statement, TUI added that, following the sale to USS, it would retain only a 1.8% stake in Airline Group and a further 1.8% of loan notes – down from 13.9% – issued by the group.

Two airlines – British Airways and easyJet – as well as the Monarch Airlines Retirement Benefit Plan, will retain their existing shares of the remaining loan notes.

USS has, over the past year, made a number of notable infrastructure investments, acquiring an airport rail link in Australia and recently buying an 8% stake in Heathrow Airport.

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