• Friendly pricing gets immediate results with a strong covered message
• Price range shows discount to European listed peers

Fasten your seatbelts, the Athens International Airport IPO has departed investor education and is flying through bookbuild hoping that its price range will allow for a smooth landing on the Athens Stock Exchange in February.

AIA books opened last week with a price range of EUR 7 to EUR 8.20 a share, pointing to an implied market cap of between EUR 2.1bn and EUR 2.46bn.

Sell-side analyst consensus predicts AIA to have estimated FY24 EBITDA at around EUR 366m with net debt of around EUR 850m, according to a source close to the deal; several sources confirmed that investors are primarily using 2024 numbers to value the business.

The first source noted that this put AIA’s 2024 EV/EBITDA valuation multiple at between 8.1x to 9.1x across the range and the dividend yield between 8.8% at the bottom and 7.5% at the top of the range. On an EV/EBITDA basis the range values AIA at a noticeable discount to European listed airports.

This news service has identified Switzerland’s Flughafen Zuerich AG (Zurich Airport) [SWX:FHZN], France’s Aéroports de Paris [EPA:ADP], Spanish Aena [BME:AENA], and Germany’s Fraport Frankfurt [ETR:FRA] as possible comps, a peer group deemed logic by sources close to the deal.

The peers have an FY24 EV/EBITDA estimated range of between 9.5x (Zurich) and 10x (ADP), with an average of 9.7x, according to data provided by Fidessa and compiled by Factset. At that multiple, AIA would command a potential enterprise value of EUR 3.5bn, with an equity value of around EUR 2.7bn when the debt is subtracted.

Source: Fidessa compiled by Factset

At the bottom of the price range, AIA would trade at a discount of around 22.5% to that EUR 2.7bn market cap and around 9% at the top of the range.

Priced to fly

An investor looking at the deal and speaking to ECM Pulse before the announcement of the range stated that they felt a range between EUR 2bn and EUR 2.5bn would be an attractive valuation for AIA, given it would represent a real discount to other large European airports.

It is under what Greece had originally targeted, with a second source close pointing to an ideal seller valuation of around EUR 2.8bn. The same source added in a later conversation that sellers had lowered price expectations in response to investor feedback and, given a hugely positive response from investors in early bookbuild, predicted the deal could be at least three times oversubscribed.

A third source close noted that AIA had over 130 meetings during the period of investor education and had chosen the range with the hopes of a great aftermarket. AIA being the first major IPO of the year after a dire 2023 had helped generate substantial interest among investors, he added.

A second investor looking at AIA played down the direct comparison with peers, given the different concession structures, regulatory structures, and revenue streams across different markets.

“I think this will be bought as a bond proxy on the dividend yield with a lot of buying from infra investors as well as emerging market funds and locals,” he said. “The dividend won’t be paid until next year but the yield across the range is fine and I think HRADF (Hellenic Republic Asset Development Fund) has been sensible, especially with a big cornerstone and small float.”

“This will probably pop 5% to 10% in the aftermarket and stay around there,” he suggested.

Books were covered throughout its price range on the full deal size including the greenshoe on the first day, a strong message showing enough demand already to price the deal right at the top.

However, the second investor urged a little caution.

“If I were the seller, I would price a little off the top to be in line with where I think the big infrastructure funds are likely to be interested,” he said. “A price right at the top plays too much to the fast money that often overinflates the order book and puts it at a bit more risk in the aftermarket”.

The first of many?

AIA’s IPO is not just of interest to the local market but is now a part of the narrative of Europe’s IPO market.

“This will be the first IPO not just in Greece but in Europe for 2024. So, in a sense we have a big responsibility,” said a fourth source close to the deal. “If it goes well, it will help drive sentiment and open up IPOs across Europe.”

As outlined by ECM Pulse at the start of the year, AIA is the first of several high-quality assets being prepared for IPO.

Spanish luxury giant Puig, owner of brands like Jean-Paul Gautier and Carolina Herrera is one of the big names expected in 2024. Private equity giant CVC, its portfolio company Douglas, and EQT-backed skincare conglomerate Galderma are also all targeting deals this year.

The second investor noted that Athens Airport would be an interesting data point for the market, but added that privatisation with strong local and infrastructure backing was unlikely to be too representative of the challenges faced by other IPO candidates.

Large European IPOs, especially those that are sponsor-backed, will face heavy valuation scrutiny and high discount demands for some time, sources have been telling ECM Pulse. A  banker off the deal agreed, saying that AIA was “a different animal” than the usual IPO curtain raiser, with a strong cornerstone investment from largest private shareholder AviAlliance and large levels of local support.

But even if AIA’s relevance to the wider market ends up being little more than a feel-good story, it will be one the 2024 market sorely needs.

The HRADF, the state fund selling a stake in AIA, declined to comment on this story.