Welcome to VINCI conference call. I will now hand over to Mr. Grégoire Thibault. Sir, please go ahead.
Good morning, everybody. We hope you had a wonderful Christmas. Many of you are probably on holidays. We know that's a special period of the year. Thank you very much for joining our conf call regarding the Gatwick Airport acquisition. You have received this morning our press release, along with the presentation of the deal. The idea of this 1-hour call is to give you some colors on this interesting and exciting transaction. To answer your question, we have Christian Labeyrie, CFO of VINCI, and in London, Nicolas Notebaert, CEO of VINCI Concessions, and Olivier Mathieu, Deputy CEO of VINCI Concessions. We'll start with a brief presentation by Christian Labeyrie and Nicolas Notebaert. We'll have a Q&A. I now hand over to Christian.
Good morning, everybody. I will be brief in order to have more time for the Q&A. We just signed an agreement with the shareholders of Gatwick, represented by GIP, after direct negotiations with them to acquire a controlling stake of 50%+ in this best-in-class airport. The transaction should be closed by the end of June 2019. We wanted to share a few information with you right away. Before Nicolas highlights the key takeaways of the asset and of the deal, let me emphasize the investment rationale of such an acquisition for VINCI and how it is perfectly in line with our strategy, as you can see it on slide eight of the slide presentation. First of all, this is a freehold asset. As you know, extending the maturity of VINCI Concessions portfolio is one of our main challenge.
Another major step in terms of VINCI's international footprint. With such a move, VINCI Airports reinforces its position of leading airports operator with the most diversified portfolio of assets worldwide. VINCI Airports enter the world's biggest air market, the London area. The price paid was directly negotiated between VINCI and the shareholders represented by GIP. Consider that it is reasonable. It meets our investment and capital discipline criteria. The deal will be rapidly accretive on VINCI profit per share. Finally, that's key in our philosophy of cash allocation, in the frame of a clear governance with GIP, we will have the control and we will consolidate this asset. I now hand over to Nicolas.
Thank you, Christian. For all of you, for us it's great news for VINCI and particularly VINCI Airports to add this outstanding asset to our portfolio, which you well know. It's summarized partially in slide four. You have all the other details of the figures in the other slides. I think it's outstanding, first because it's a freehold, which means, in other words, perpetual, no limit of time. It's a perpetual property regime, even if we had the small airport of Belfast, it's quite new for us to have such a big asset in our concession portfolio for unlimited time. Secondly, it's outstanding because it's a very big airport, more than 46 million passengers in the last 12 months, the second in U.K., the eighth in Europe. It will become the biggest airport in VINCI Airports portfolio.
Until now, it was Lisbon and Kansai, a little bit less than 30 million. As you know, it's located not only in U.K., but it's a premium and wealthy region of London. The London air market, the biggest in the world in terms of metropolis, is congested, it's also a very resilient airport, very robust traffic because there is not much alternative to grow. It's also outstanding on the operating point of view. Gatwick is a very efficient, probably the most efficient in the world in terms of management of passenger and retail flows with a single runway. We are very much interested with the synergies it can provide to our network of airports. Probably we would get the benefit of this knowledge in all our airports in the world. We could also provide some commercial support to Gatwick in order to raise the commercial revenues.
Regarding the regulation, that's another key point. Have in mind that it's not a RAB-based regulation, but a lightened regulation based on bilateral agreements with airlines. Very supportive airlines. As you know, the biggest airline in Gatwick is easyJet, that we know very well from our Portuguese, Belfast, and Lyon North experience. It's a very solid partner. Also British Airways, which is growing a lot as well in new long hauls and bigger aircraft in Gatwick. It makes that with this type of contract and agreement, it makes a flexible, pragmatic business mind focus on the overall passenger and airline satisfaction for the new deal. Finally, last and not least, the price we pay of GBP 2.9 billion for a 50% stake implies an enterprise value below 20x EBITDA. We think it's very reasonable if you remember, for instance, London City deal, also the French regionals two years ago.
For a shorter time in the case of the French regionals, 25, 30 years. We get a very low multiple for unlimited time in a very rich city of the world. We think it's a fantastic opportunity, and the price is very reasonable for such a great asset considering this recent transaction. We see an upside, particularly in the retail part, for the ones of you who know Gatwick.
We see a very good optimization process to get a gorgeous aircraft. The traffic is growing, and we are very comfortable with all the rationale. We are very excited about it. It's a very efficient airport, very big, and still room for capacity to increase. The regulation is lightened, and there is a potential upside in the commercial base. For, again, a very reasonable price between 19x and 20x EBITDA. We are all here to now answer any of your questions about this deal. Thank you very much.
Ladies and gentlemen, if you wish to ask a question, please press zero one on your telephone keypad. We have a first question from Stephanie Tate from Royal Bank of Canada. Madam, please go ahead.
Good morning. Thank you for the time. I bring my questions. Merry Christmas, everyone. My first question is on Brexit and the risk it represents. Please give us a bit of insight on how you think about it. Obviously, it's a very long-term acquisition with a perpetuity. Obviously, my question, timing and how you valued that risk. Secondly, on GIP, which will remain obviously an important shareholder, could you please let us know what their long-term investing is around that asset and how long they are locked for or not? If you could increase your stake eventually in Gatwick. Thirdly, on the regulatory backdrop. There's no rush, but could you maybe give us a bit more details on long-term tariff thinking, et cetera, especially given you said that the airport was already very efficiently managed, how you think about valuation there? Thank you.
Okay. Can you hear me?
Yes, very well. Thank you.
Okay. Nicolas Notebaert speaking. First, about Brexit. The good thing for us is that we made all our assumptions with all the last figures of any bodies in the world about the potential British GDP evolution in the future. As you know, Gatwick is a 50/50 airport. You have one effect, which is the inbound traffic from the rest of the world, where if the pound, for instance, goes down, it provides a lot more tourists to the British zone and particularly the London system. On the other side, we took assumptions which are reasonable about British GDP and the potential for the currency. Probably, it allows us to have such a reasonable price because we are at a moment of probably there is less competition that there could have been at other moment.
As we took these very reasonable assumptions of GDP and therefore traffic, it provides a reasonable GDP and a reasonable price for our acquisition. Nobody knows afterwards what it could do. As I told, the London airport system has a capacity crunch. It's very congested, which makes that even the Monarch failure last year provided a rush to the slots of Gatwick immediately. At this time, naturally, Brexit was known, and even with this failure, the slots were immediately reallocated, and the traffic was up, not only last year but also this year. Even if nobody knows exactly in every of the next month what's going to happen, we think the traffic of Gatwick is very robust and resilient as it has proved in the last years.
What we see in the potential of flights of the next year is very appealing on this reason. About GIP, as they mentioned in the communiqué, they are going to re-syndicate 49.99%, which is also a very good signal to us because they don't leave. They re-manage half of the equity in the future. They reinvest, which is a good signal that they will provide all our support in continuity with what was done in the past 10 years. There is a full continuity of the management with us. We think it's a good signal that they reinvest with us in the next six months, probably with some new LPs. For the details, they are not known today, and I advise you to discuss with them later on when they have their new LPs. Regulatory.
Good thing about the valuation is that the prices, the charges within Gatwick are quite low, quite reasonable, very different from Heathrow. Heathrow has high charges and regulated asset base. The fact of today is that the British regulator moved to a more passenger experience and passenger satisfaction orientation. As far as we have agreements with the airlines, which is the case with easyJet, British Airways, and all the major airlines of the airport. It doesn't ask for a strong regulatory framework. We made reasonable assumptions for the future as we have a limited freehold. Again, as the existing price is very low and not challenged, we think even with very reasonable assumptions for the future, it is not a very difficult matter for us to consider.
Again, it's not RAB-based, it is soft management of the constraint, and it's based on agreements where we have visibility already until 2026. The actors of the system which we met naturally, want more resilience and operational efficiency. The cost of them for any disruption in Gatwick are higher than discussing some details of the pricing of the charges, which is why they give priority to the satisfaction of passengers and operational excellency to the former and the past half regulation. It is a change of the British regulation with the CAA, it is also what is required by the major airlines, because they would suffer more from disruption than from any price difference in the future.
Maybe just very on staying up on the fact that it's already very efficiently managed. Do you still see some room for lot of value creation based on even better management of the airport?
I would say we see a room of value creation in our price with our BP in any case. For the ones who know a little bit the asset, I would say probably there is more margin on the commercial side, particularly the duty-free, the duty-paid, than on the operational side. The operations are quite well managed in order to maximize the number of passengers per flight and the number of movements. Probably the settings of the commercial offers within the airport are not perfect, we think with our knowledge and working with the teams of Gatwick, we can provide better proposals for our customers, it will rise probably a little bit, the yield spent per pax of our passenger in the future.
Naturally, technically, operationally, we exchanged our plans with both team and management, we are working in continuity both on the CapEx and optimization of OpEx. Value creation lays in lower price, also in the possibility to upside a little bit commercial activity.
Thank you.
The next question comes from Sven Edelfelt from Oddo. The floor is yours.
Yes. Hello. Good morning, everybody. A couple of question for me. I guess it's a bit early, but could you maybe talk about the internal rate of return of this asset? That's the first question. Broadly speaking, K ansai and even ANA has been tremendous acquisition for VINCI. Do you believe Gatwick will be the same, to the same kind of magnitude, I would say? Could you maybe comment on the revenue per passenger, maybe?
Maybe I can answer the first part of the question, Christian. We cannot compare Portugal with Japan or with U.K. I mean, the situation are different, but in terms of timing, as Nicolas explained before, I think the timing is particularly favorable for acquiring this asset, considering the uncertainty that have been commented about the Brexit and the fact that we have been able to negotiate directly with GIP is the best evidence of what I just said. The multiple, which is below 20 times EBITDA, considering other transaction which were completed in the recent past in the U.K., is another evidence. In terms of rate of return, I think it's a bit early to answer this question. Let us finish the closing of the transaction, and then we will answer the question next year.
Okay, thanks.
What I can add to the example given by Christian, each case is different, but the fact that we moved to the Japanese system as a first mover, the fact that we believed in Portugal end of 2012 at a difficult time for EUR, I would say the parallel is that investing today in London helps us to have less competition probably than it was the case two years ago for the deal of London City. A very reasonable price for an asset which doesn't change. I would say London is London. First, London is probably better than U.K. We made our whole assumptions with a U.K. GDP. In our activity in and out, the population of London is rising, and it's a very attractive place both for people moving out.
Sorry for my U.K. colleague, the weather makes it that sometimes people need to leave to a vacation or to get a little bit of sun elsewhere in the world. Also in, because I can see it, I'm here in London for the end of the year, it's a very attractive city to foreigners, and I mentioned it earlier.
Even if the pound level remained a little bit low, it would make this quite expensive city a little bit more attractive to a lot of visitors, which is precisely a very good market for Gatwick. Which is why it's both robust with the population and its ability to travel, which is higher than anywhere in the world, but also a very attractive metropolitan city for tourism. As you know, the traffic of Gatwick is mostly tourism and visit friends and relatives. It's a very high-level market. I would say yes, we believe in U.K. and London at this time, which probably helps us to get a very reasonable price and for unlimited time. We really believe in London for unlimited time as a very high potential with the world aviation market.
Thank you very much for your answers.
The next question comes from Alexis Jonas from [Bank of America]. Sir, please go ahead.
Thank you for taking my question. How will VINCI finance the acquisition, and what will be the impact on the net leverage ratio of VINCI and Gatwick?
The financing of the acquisition will be made through borrowing in pound. The condition are not negotiated yet, but we have been solicited already by many banking partners. I think we will be able to optimize the condition of this additional borrowing.
Fully debt financed?
Yes, of course. Are you meaning that we would increase our capital to finance Gatwick? No. That's not the case.
Yes. This is all debt, correct?
All debt.
Okay.
That's the first answer. What was your other question?
what's your pro forma net leverage ratio for VINCI as a whole and then for Gatwick on a standalone basis? Will Gatwick just remain separate?
For Gatwick, there will be no change in the financial situation since Gatwick has already a debt which amounts to something around GBP 2.6 billion, GBP 2.7 billion, which is ring-fence, as you probably know. It's rated BBB+ by S&P and also by Moody's. We have no intention whatsoever to change the present leverage of Gatwick. As Nicolas explained it, we will consolidate the assets, which means that we will consolidate in our balance sheet this debt, even if it's entirely a ring-fence. Which means that in terms of risk analysis, I believe that the rating agency shouldn't change their appraisal of VINCI because of this additional consolidated debt. What they will consider will be, in my opinion, only the acquisition debt, which will amount to GBP 2.9 billion approximately, which shouldn't affect either the rating appraisal of the group.
Okay. The rating will remain as it is, do you think the same for the outlook?
We haven't met with the rating agency, considering the analysis they provided in the recent past, we believe we have enough headroom to increase our debt without affecting the rating.
Okay. One follow-up question, if I may. Given that you've now acquired Gatwick, obviously, there's a lot of speculation that you could be a potential acquirer of a majority or some stake in Aéroports de Paris should that privatization be ever privatized. Does this Gatwick acquisition influence how much you would be willing to pay for Aéroports de Paris or in any way affect how you approach that potential transaction?
We are pragmatical. Aéroports de Paris is not on the table for the moment. We had this fantastic opportunity of acquiring a majority stake in Gatwick, we decided to seize it. The government decide or not decide what they intend to do about Aéroports de Paris, we will reconsider the issue. For the moment, it's not the time to answer the question because it's not on the table.
All right. Let me ask a little differently. Given that you have somewhat less room within the rating given the acquisition of Gatwick, should ADP privatize, would you be a little less willing to pay a smaller amount so that you can protect your current rating?
This is an issue that we will discuss with the rating agencies in due time, probably in the course of the first half of next year.
Okay. Thank you very much, and happy holidays.
Thank you.
The next question comes from Jim Lamonier from Legal & General. Sir, please go ahead.
Hi there. Good morning. Just a follow-up question on your financing plans. I know you said they're not finalized yet and that you're intending to finance via the debt markets, but just given the potential that Aéroports de Paris comes available at some stage, are there any assets within the VINCI portfolio which you could consider monetizing to part-finance any M&A?
No, that's much too early to say to answer this question. Since we don't even know what are the intention of the French government, we're not going to talk about potential disposal of assets.
Is it an approach you might consider for this deal, or are you set on?
There is no deal on the table. I'm not going to imagine potential deal in order to finance a deal which is not on the table at this moment.
I'm just trying to make reference to this Gatwick deal.
No, excuse me. To make this Gatwick deal, there's no need to dispose anything.
Okay.
We will just increase the leverage of the group.
Super. That's great. Thanks very much.
The next question comes from Shirley Moladina from VA Pension Fund. The floor is yours.
My question has been asked.
I will pass to the next person. Next question comes from Sharon Beaton from Columbia Threadneedle Investments. The floor is yours.
Thank you. I've got a few follow-up questions. Three. The first one is on funding. Should we expect any issuance from VINCI Group at a parent level to finance this acquisition in the coming months? Secondly, Gatwick is operating at capacity already, I believe. Will you consider renewing the planning permission for the second runway at Gatwick? Thirdly, Brexit is happening in March. How much of disruption are you expecting to volumes shortly after March? Given the comments on potential failure of smaller airlines as well, how quickly could you expect to fill available airline slots or landing slots as they come up over the next couple of years?
I will answer the first question. Nicolas will answer the other two. In terms of new issues at the parent company level, as you know, we issue bonds on a regular basis at the parent company level in order to refinance the debt of the group. Obviously, we will continue to do that. We might issue bonds in the course of the first half of the year when we have a more precise view on the date of closing of the deal.
Can I quickly sneak in a question on the back of that? VINCI Airport itself isn't going to be a standalone issue in future as it grows?
No, that's not our intention. Not at the VINCI Airport level. At an asset level, we have already issued debt. For instance, in the case of the Dominican Republic operator, which we own fully, we have issued a bond two years ago. That's the possibility we have, but not at the VINCI Airport level.
Okay, got that. Thanks.
On your operational questions. First, there is a capacity crunch on the London market, which makes the airlines upgauge their planes. That's the case for easyJet and British Airways. They order new planes, bigger ones, in order, with the same number of movements, to increase the number of passengers. As IAG and easyJet are doing very well, they increase a lot their flight size in Gatwick. Secondly, we have plans following the management and what GIP had prepared to do small technical adaptation, both physical and also with the technology. To move ahead progressively from 50 to 60 movements per hour to Gatwick, it will last at least 15 years that we make these movements. The addition of the two makes that naturally, we will not grow as a limited airport, but we have reasonable assumptions of regular growth in the next years, followed by aircraft upgauge.
I met personally the airlines I mentioned. They really like this airport in terms of potential. Secondly, the technical adaptations we are able to make to increase the number of plane movements progressively in this airport.
Thank you. Okay. The Brexit question.
London is not U.K., you have something which is not in our price. We have a sort of London premium that we could get, thanks to the incredible status of the city in the world.
Maybe finally on the filling in the airline slot fees, if available slot fees as the smaller airlines fail.
Sorry, I didn't get the end of your question. Sorry.
For us who've been following that, it seemed relatively simple. It took a matter of weeks or couple of months or so to fill in available slots as airlines failed. Monarch, for example. Going forward, do you see a change to that pattern in terms of how quickly or easily airline slots could be sold?
What happened to Monarch is a very good example of the resilience of this airport, because Monarch failed last year. Immediately, the slots were taken by the airlines already present on the airport very quickly. You couldn't see in the passenger flow of 2017 and 2018 any effect, which shows that you have existing airlines with fleets to replace quite immediately. The slots valuation of Gatwick is so that some airlines could even be bought by other airlines in order to secure the slots, which makes us very comfortable about the resilience of this asset on this side.
That's really useful. Thank you very much.
Next question comes from Eric Lemarié from Bryan Garnier. Sir, please go ahead.
Yes, hello. Good morning. I've got a couple of questions, please. The first one regarding mid-term assumption. I'm trying to build a model, and I would like to know if you could give us an idea of the level of the maintenance CapEx we could expect for Gatwick in the mid-term, and maybe you could give us your view on the level of EBITDA margin we could expect in the mid and long term for Gatwick. Second question regarding the slide number five, you mentioned asset stewardship as part of the CapEx. Could you explain what this is? Is it a sort of compensation fees? The last question on traffic. In your view, what is the maximum number of passengers Gatwick can manage without any additional runway? Thank you.
Okay. Thank you for your questions. Very technical. It's probably too early for us to give you details of a model, and I think we can manage that after the acquisition. We showed you in slide five, what are the objectives today of the management. We need to both be very dynamic on these aspects, and we try to figure out also on our side. The CapEx today of the last years were a bit above the average, far quite above the average, because in such an airport, you have long-lasting maintenance and repair CapEx, and you have sometimes some peaks. We are more in the peak periods. In order, you have two plans. We have a plan which is integrated in the business plan of the seller and ours, which is how to improve progressively from 50 to 60 movements with, I would say, hard and soft.
The hard is to have a quick exit from the runway to the taxiway, and to have also the use of new technology about ATC, so that in the next 15 years, progressively, we can move from 50 to 60 movements. That's the first idea. The second idea, which is an upside, it's not in our plans and in plan officially today, is would there be a way to use an existing taxiway to make it a sort of limited use runway to the north of the existing one? It would probably help to move from 60 to 70 movements, seven zero, so it's not an enormous change. Naturally, it would require a little bit more CapEx and also local procedures to get the authorization. This one is really an upside.
It's not in our acquisition, but there are good efforts ongoing to try to think how it could be possible. That's a way. There is no, in this case, you don't have a sort of limit of number of passenger. Why? Because the upgauge of aircraft I mentioned is still ongoing and could last for many, many years as the optimization of the shoulders of the program. Today, yes, you have a lot of slots which are used, but there are still periods of the year, period of the day, where they are not fully used. Which is now there is no limit as a fixed number of passenger and flights in the future. We can tell we are very reasonable in our approach to the future, so that we are very confident and robust about these assumptions.
We have ideas to increase the number of movements, potential upside if there is a northern runway, and the upgauge of aircraft, which is already ongoing because we know the fleet evolution of the major airlines and also the new projects of Airbus and Boeing, makes us very confident for the future about these assumptions. You had a question about something that I cannot read.
The asset stewardship as part of the CapEx you've got, for instance, in 2018.
Which slide? Sorry.
Slide number five.
Asset stewardship. This is Olivier Mathieu speaking. Asset stewardship means maintenance CapEx. I think that's the figure you're looking for.
Okay. That's cool.
That's okay.
Yes. Thank you very much.
Next question comes from Nicolas Mora from Morgan Stanley. Sir, please go ahead.
Yes, good morning, gentlemen. Thanks for keeping us busy over Christmas. Just want to know a couple of follow-ups. First, how do you pencil in Heathrow extensions with the third runway, and how that would impact Gatwick over the medium to long term in terms of transfer of airlines out of Gatwick into the new Heathrow? Just on the CapEx and capacity constraints and so on, in terms of terminal, so I understand the constraints on the runway, but in terms of terminals, you don't see any limit to, I think they are, what, 50, 51 million passengers to 2021. That's what we understand correctly.
Last one on the financing. You don't plan to re-lever or to use an SPV on top of your stake in order to optimize your returns? You are happy with just basically paying your equity of GBP 2.9 billion and the returns that would generate? You do not intend to basically create an intermediate SPV to improve returns.
I'm sorry, last question, VINCI. I'm not sure to understand your point, but since we intend to finance entirely the acquisition of our 50%+ through additional debt, I don't see what we could do better than that. The addition of SPV wouldn't bring anything more, unless we intend to sell out of the 50% to somebody else, which is not the intention. I think the condition of borrowing at the national level should be, in any case, much better than the one we could obtain out of SPV. It makes no sense to me to go in this direction.
Okay. Understood.
About your operational questions. I would say no, we never said EUR 51 million is the limit. It's just the situation in 2021. The upgauge of aircraft is going to continue. The shoulder use also. The capacity to move from 50 to 60 movements will not be done in 2021. It gives very much capacity for the future. No, we don't stop, and it will go on growing after 2021 figures. What I didn't give is the final limit because, to be honest, we don't know exactly the type of aircraft that can be managed in 25 years as an average.
We said that you have the market in and out, and we took quite reasonable growth assumptions for the years after 2021, in order to use at the best capacity. Yes, in 50 years' time, you have a physical limit if you stay with only one runway. Even in between, you have a regular growth, which creates some value to the asset.
Okay. The medium term with Heathrow, you're-
Another example I would like to say is that, for instance, to show this extra capacity, we are going to build the new Pier number 6 . It will show the new capacity again in 2023. Physically, we create regularly capacity to have more planes and also to facilitate the better use of the runway as it is today. Again, the market is positive. Let me sum up that Gatwick grew far higher than the European hubs in the past years. Even with this existing constraint, the growth prospects are very good.
Okay.
The next question comes from Josep Pujal from Kepler Cheuvreux. Sir, please go ahead.
Yes. Hello. I had two questions, please. The first one is, if you could tell us more, when you say several times that the price paid is very attractive, you are exclusively looking at the EV/EBITDA multiple that you mentioned several times, you compare to previous deals in the sector. Do you have other criteria in mind? If yes, which ones? Yeah, for example, I'm very interested if IRR is something that you look carefully and what does it mean with price? My second question, maybe you said it already, but apologies. What is the financial impact on VINCI? If you could tell us at the end of the year, pre-deal, what was the net debt to EBITDA which was expected? Pro forma with the deal, how it changes? It would be very useful. Thank you.
Well, the conclusion is easy to make. You just add up GBP 2.9 billion for the acquisition debt, plus the GBP 2.6 billion, GBP 2.7 billion of the asset debt. That gives you the additional debt we'll have to add up to your forecast for the VINCI Group. You add up around GBP 450 million or GBP 460 million additional EBITDA to your forecast, the EBITDA of the group.
Okay. I have
As for the price, Nicolas made a comparison between the multiple, which is less than 20x EBITDA based on the forecast for the existing year, compared to other transactions which were completed in the U.K. in the recent past, like for instance, London City, I think someone wants. In France, the privatization of Nice, for example. Which are not perpetual concession, but limited duration concessions.
Just to add on this last one. Naturally, we don't do a valuation on our side just by multiples. We take reasonable input assumptions, we think the return is interesting. We give you this appreciation because, as it's too early before the time of the acquisitions to look into details. With the assumptions we made, it's a good return. If you compare to the multiples, it shows for, again, a limited period. You need to calculate it on the very long time, a very good return compared to comparable assets. We mentioned Regional. We can also make the comparison with London City. Naturally, the growth will be higher in London City, but the multiple for London City is far higher.
Okay. Thank you.
Next question comes from Dominic [Edridge] from Citigroup. Sir, please go ahead.
Hi. I just wanted to clarify on funding once again. You mentioned that the deal will be debt-funded. Can you clarify if the debt would be issued out of the VINCI level or out of the Gatwick level?
At the level of VINCI.
All right. Thank you.
Next question comes from Victor Noyer, Santander. Sir, please go ahead.
Good morning. One question regarding the dividend policy, which is the dividend policy you set with your new financial partners, GIP? Is it related to the net income, to the cash flows, free cash flow to equity, whatever it is? The second question is related to the hedge of these cash flows, assuming that going forward, we could have a weakness of the GDP. To protect the equity invested in this asset, how much of this cash flow will be hedged through exchange ratio products? Related to the multiple, now you are above three times EBITDA. I assume that you are not a pure infrastructure company. Which is the maximum leverage of the group that you feel comfortable with? Thank you.
Maybe I leave Olivier or Nicolas to answer the first question.
Sorry.
The first question was regarding the dividend policy. What I can tell you is that we agreed with GIP to distribute any cash that will remain available once everything has been settled at the Gatwick level.
Assuming the current leverage or increasing the leverage of the asset?
No. As it was said before, I think, our common goal is to maintain the current rating policy of Gatwick Airport, and it is leverage. We are going to increase leverage further to the current limit that is given in the financial documentation of the company.
Okay.
In terms of the hedging of the cash flows, probably a large part of the borrowing that we intend to put in place to finance this acquisition will be in GBP. As a result of that, there will be a natural hedging between the borrowing and the dividend that we will receive out of the assets. As for the minimum or maximum leverage we can have at the level of the VINCI Group, this is an issue which would be addressed, as I said before, when we start discussing with our main rating agencies, Standard & Poor's and Moody's, in the course of the first half of next year. The level being determined by the level of the rating we intend to keep, and I remind you that we have A- credit rating with positive outlook with S&P and stable outlook with Moody's.
Okay.
Next question comes from Sharon Beaton from Columbia Threadneedle Investments. The floor is yours.
If you gentlemen might, my question has been answered. Thank you.
We have no further questions. Ladies and gentlemen, if you wish to ask a question, you need to press zero one on your telephone keypad. We have another question from Victor Noyer, Santander. Sir, please go ahead.
Apologies. I have a remaining question which is related to the commercial revenues. You said that most of the upside could come from the retail business. Do you have any plan to increase the surface of the retail business? Thank you.
Yes. Nicolas Notebaert speaking. As you know, Gatwick, probably with the former regulation and mostly because of the operational needs, most of the efforts have been made to sustain a very efficient ratio. That's part of the synergies we expect with our network. We will learn probably a lot with the way Gatwick operates a lot of passengers in a very short amount of time, that will be extra value for our overall assets. On the other side, if you know the assets, what is for sale is in a very limited space, that's with our experience and working with management, we think we can provide a better allocation of space and better outlets o f a higher level duty free to the passengers in general. Yes, we expect better commercial yields in the future in setting better spaces and organizing new types of shops, more footprints on higher yield.
Okay. Optimization of the current space?
Optimization of space, renegotiation of contracts progressively where we have a good track record, setting new types of shops allowing higher yields from the passengers.
Okay. Yeah.
We have no further questions. Ladies and gentlemen, let me remind you that if you wish to ask a question, you need to press zero one on your telephone keypad. We have a new question from Pierre Rousseau from Berenberg. Sir, please go ahead.
Yeah. Good morning, gentlemen. The press release mentions some closing considerations which could affect the equity value that you give. Could you give a bit more details on what could be discussed that you mentioned in the release? Thank you.
Olivier?
Your question regarding the conditions precedent to do the closing?
No, the limited change of the price. It's on the communication, the adaptation of the price.
No. The acquisition is made on the principle of a lock-box mechanisms. The price will be adjusted based on this lock-box mechanism, which is really standard. Nothing particular to mention around that.
Should I pass to the next person?
Your last question.
Last question is from Peter [Adderton] from Macquarie Securities. Sir, please go ahead.
Yes. One final question. At the very start of the presentation, you suggested that the transaction will be quite accretive quite quickly, I think you said. Could you just give us some indication as to what your thinking is on that? Do you expect it to be accretive in the first full-year of consolidation?
Olivier, to answer?
We expect it to be accretive in the first two or three years of the acquisitions.
Not in the first full year, i.e., 2020?
Depending on the performance of the asset, why not? To be sure, we expect it to be accretive in the first two or three years.
Okay. Thank you.
Obviously, it will depend on the condition at which we will finance the acquisition. We can have a more optimistic view, but this will depend on the cost of financing that we will obtain from the lenders at the parent company level. We prefer to be a bit conservative, but we might do better should we optimize more than expected the cost of financing.
Thank you very much.
It will also depend on some accounting assumptions that will have to be made in the first consolidation of this company once the acquisition is closed.
Can you clarify what those accounting assumptions would be?
Depreciation.
Okay. Thank you very much.
We have no further questions.
Thank you very much for your time, and have a happy New Year with a bit of advance. Bye.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.