AIRPORT SALE Frankfurt-Hahn Returns to Auction

After calling off a botched deal with an obscure Chinese investor, the ailing Frankfurt-Hahn Airport needs a new buyer. The state of Rhineland-Palatinate has reopened the bidding process and other Chinese firms are already gathering at the auction block.
No takeoff for Frankfurt Hahn airport sale.

The state of Rhineland-Palatinate has re-opened the bidding process for Frankfurt-Hahn Airport after a deal with an obscure Chinese investor fell through.

"We will speak with whoever expresses interest," Martin Jonas, the state's new auditor for the sale, told Handelsblatt. Mr. Jonas is the corporate finance chief at Warth & Klein Grant Thornton.

Rhineland-Palatinate's original auditor for the sale, KPMG, had signed off on a deal with the Shanghai Yiqian Trading Company or SYT for €13.5 million ($14.8 million).

But the obscure Chinese investor failed to pay on time forcing Rhineland-Palatinate, the airport's majority shareholder, to cancel the deal.

"The state contested the contract with the original buyer SYT due to fraud," Mr. Jonas said.

Regional state broadcaster SWR had raised doubts about KPMG's reliability in checking the deal, reporting that there was "evidence of risks".

We represent Chinese firms that are interested in buying. But these companies couldn't position themselves due to the quick sale to SYT. Hermann Meller, Partner, Dentons Law Firm

The regional broadcaster tried to contact the financial backer, the Shanghai Guo Qing Investment Company, at its listed address but only found a tire dealer. The address was an hour's drive from KPMG's offices in Shanghai.

Yu Tao Chou, the chief executive of Shanghai Yiqian Trading, proposed the deal and claimed he would expand freight traffic at Frankfurt-Hahn. He also said he used to fly into the airport as a pilot for the Chinese cargo carrier, Yangtze River Express.

But the professional service Airliners.de reported that Yangtze managers had never heard of Shanghai Yiqian Trading or its chief executive.

The Chinese Chamber of Commerce in Germany said it didn’t know anything about the supposed investor either. Its officials weren’t even able to the locate the company on Chinese Internet sites.

After the deal fell through, Rhineland-Palatinate's interior minister, Roger Lewentz, said the state would re-open negotiations with the two bidders that lost out, German-Chinese investor ADC and an unnamed Chinese-American investor.

ADC wants to turn Frankfurt-Hahn into a hub for Chinese airlines. The firm is offering €1 and the equivalent of the airport's cash on hand, but would have to take on a loan of €2.3 million.

The financially ailing airport, on a former military base west of Frankfurt in the Hunsrück region, had lost money for years. According to Handelsblatt's information, Frankfurt-Hahn lost €17.5 million last year. 

ADC is backed by several Chinese investors and its managing director, Siegfried Englert, was a state secretary in Rhineland-Palatinate's Economics Ministry.

The firm is cooperating with the Chinese conglomerate HNA, the owner of the air freight company Yangtze River Express.

The other candidate from the last round of bids, the unnamed Chinese-American investor, has offered slightly more than ADC. Other Chinese companies are also interested.

"We represent Chinese firms that are interested in buying," Hermann Meller, a partner at the law firm Dentons, told Handelsblatt. "But these companies couldn't position themselves due to the quick sale to SYT."

The European Commission has said the airport should go the highest bidder and has called on Rhineland-Palatinate to "act in principle like a seller in the free market and avoid state assistance."

But Mr. Jonas and the government of Rhineland-Palatinate are trying to convince Brussels that considerations other than the price should also factor into selecting a buyer. The future of the airport and its 2,000 employees should play a role in the decision, Mr. Jonas said. 

"A respectable private businessman wouldn't be indifferent to the fate of the company he sold," Mr. Jonas said.

 

Christoph Schlautmann covers the logistics and waste management sectors for Handelsblatt. To contact the author: [email protected]