Jockeying over the sale of Gatwick is intensifying as the airport’s owner, BAA, prepares for an appeals hearing that will help decide the future of the UK’s second-biggest airport.
A number of groups have expressed interest in Gatwick since BAA, controlled by Spanish infrastructure company Ferrovial, put it up for sale last September in an attempt to pre-empt a Competition Commission ruling to sell off some of its seven UK airports.
Global Infrastructure Partners, the investment fund started by Credit Suisse and General Electric that runs London City Airport, is the leading contender. However, negotiations foundered as the financial crisis damped Gatwick’s prospects for growth and made securing acquisition funds more difficult.
BAA, which at first hoped to attract bids of up to £1.8bn, was reluctant to go below the £1.6bn estimated value of the regulated asset base at Gatwick, and rejected a bid of about £1.36bn from GIP this year.
The difference between the two sides has since narrowed according to one person familiar with the negotiations. “The gap is actually now pretty close,” the person said yesterday.
However, others say there is a chance other bids could re-emerge. “There are still two interested parties,” said a person close to Ferrovial. “The question now is whether they can secure financing and clear a few other hurdles.”
Citi, in a recent note to clients, said a consortium led by Manchester Airport Group and Borealis, the Canadian infrastructure fund, could “not be ruled out”.
Speculation of a deal nearing has increased as BAA prepares for a Competition Appeals Tribunal hearing, due to start next Monday, over its appeal against the commission’s move to force it to sell three of its airports – Gatwick, Stansted and either Glasgow or Edinburgh. Ferrovial has favoured the sale of Glasgow.
Ferrovial has always maintained it was in no rush to sell, although it has used the appeal partly as a stalling tactic to allow investment conditions to improve.
Some people close to the negotiations claim it could be in BAA’s interests to produce a Gatwick sale ahead of the hearing to persuade competition authorities to give it more time to sell Stansted and one of the Scottish airports in the difficult economic climate.
BAA must repay £1bn of its existing bank debt in March next year and the Gatwick sale would help the refinancing.
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