Orix and VINCI Airports’ US$18bn acquisition of a 44-year concession for Kansai and Osaka Airports
Rothschild Global Advisory advised Orix Corporation, as part of a consortium with VINCI Airports, on the acquisition of a 44-year concession for the operation of Kansai International Airport and Osaka International Airport from the Japanese Government, setting a precedent for future airport privatisations.
Built on an artificial island close to Osaka and opened in 1994, Kansai International Airport had seen a difficult inception, with high construction and maintenance costs, and reduced air traffic due to the impact of, amongst other factors, the SARS outbreak in 2003.
It did however possess potential for growth, being well placed to capitalise on Japan's sharp increase in overseas tourism, which well exceeded the Government's target of doubling by 2020. This growth comes primarily from Asia and is aided by the expansion of the low-cost carrier market in Japan.
Kansai International Airport was therefore the ideal centrepiece of the Government's new privatisation strategy - to bring private investment into public infrastructure.
The lead and final bidder became a consortium of Orix, the Japanese leasing and diversified financial services group, and VINCI Airports, the French airport developer and operator. Rothschild Global Advisory was adviser to Orix.
This was a challenging transaction due to the long length of the concession and high concession payments of US$18bn required by the Government, and due to its precedent-setting nature, requiring innovative thinking from all parties.
Rothschild Global Advisory played an instrumental role in providing inputs on the commercial structure of the concession, helping to standardise it within the market and arrive at terms acceptable to all parties. This leveraged our global experience in concessions, particularly in Asia, our highly informed perspective on the global infrastructure sector, and the insight into Japanese markets brought by our Rothschild team in Japan.
Orix was able to leverage its real estate management expertise, its understanding of local markets and its financing experience, to complement VINCI Airports' experience in running airports. The ownership of the final concession, which also included Osaka International Airport (also known as Itami Airport), was structured as 40% to Orix, 40% to VINCI Airports, and 20% to a number of local companies.
The resulting transaction is seen as win-win for both the concessionaires and the Government, and meets Orix's long-term strategy of expanding its concession portfolio and increasing its presence in the Kansai region and Japan. The concession sets a precedent for future privatisation processes in Japan, and across Asia.-