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China fund buys 10% stake in London's Heathrow airport China fund buys 10% stake in London's Heathrow airport
(about 3 hours later)
China Investment Corporation (CIC), the country's sovereign wealth fund, has bought a 10% stake in the firm that owns London's Heathrow airport.China Investment Corporation (CIC), the country's sovereign wealth fund, has bought a 10% stake in the firm that owns London's Heathrow airport.
The Heathrow company also has stakes in London's Stansted airport, Southampton in southern England, and Scotland's Glasgow and Aberdeen. Heathrow Airport Holdings' other UK airports include Stansted, Southampton, Glasgow and Aberdeen.
CIC was set up in 2007 to invest some of China's foreign exchange reserves.CIC was set up in 2007 to invest some of China's foreign exchange reserves.
The UK purchase comes after some other countries have raised concerns about selling key assets to Chinese firms. Despite concerns in other countries about Chinese access to key assets, the UK has been developing closer business ties with China.
Last month, US President Barack Obama blocked a wind farm deal involving Chinese firm Ralls Corp on national security grounds. "It is fair to say that the UK has a more open relationship with China than many other major economies," said Stephen Joske, senior manager at Australia Super, a pension fund based in Beijing.
The US had also alleged that Chinese firms Huawei and ZTE are security risks and warned its firms against doing business with them. "There is certainly push all around the world for scrutiny of Chinese investment - it has been ringing alarm bells.
Australia has previously blocked Huawei's plans to bid for work on its national broadband network. "It is unfair to an extent, as these deals are a win-win transaction. Politics has been overshadowing economics."
Despite these issues, the UK has been growing its business ties with China. British opportunities
This is CIC's second major investment in UK infrastructure. It bought 8.68% of the firm behind UK utility group Thames Water in January. This is CIC's second major investment in UK infrastructure. In January, it bought 8.68% of the firm behind UK utility group Thames Water.
>The fund will pay £450m ($726m) for the 10% stake in Heathrow Airport Holdings Ltd. The latest airports deal will see >the fund pay £450m ($726m) for a 10% stake in Heathrow Airport Holdings Ltd, which was previously known as BAA Ltd.
Under the terms of the deal it will buy Spanish firm Ferrovial's 5.7% stake in FGP Topco Ltd, the holding company which owns Heathrow Airport Holdings Ltd, for £257.4m. Under the terms of the agreement it will buy a 5.7% stake in FGP Topco Ltd from Spanish firm Ferrovial for £257.4m. FGP Topco is the holding company which owns Heathrow Airport Holdings Ltd.
CIC will get the remaining 4.3% stake from other shareholders of FGP Topco Ltd for £192.6m. CIC will get the remaining 4.3% stake from other shareholders of FGP Topco Ltd at a cost of £192.6m.
The Chinese investment company is not the first foreign firm to buy a stake in the Heathrow holding firm.
In August, Qatar Holdings bought a 20% stake, and this deal is currently awaiting approval from European competition regulators.
China expansion
Foreign firms are increasingly looking at the UK for investment opportunities as the economic slowdown has pushed down the price of assets.
At the same time, problems in the eurozone have made the UK, which is not part of the European single currency, a more attractive and stable destination.
Earlier this year, Chinese telecoms and computer network firm Huawei Technologies said it was going to invest £1.3bn expanding its UK operations.
And while UK Prime Minister David Cameron said the investment showed that the UK was "open for business", similar moves in other countries have raised concerns.
Last month, the US claimed that Huawei and another Chinese firm posed a security risk and warned against doing business with them.
In a separate move, US President Barack Obama blocked a wind farm deal involving Chinese firm Ralls Corp, citing national security issues.
Australia, meanwhile, has previously blocked Huawei's plans to bid for work on its national broadband network.