BAA puts London-Gatwick up for sale

[Pieter C. 5]

BAA Puts London Gatwick Up For Sale

 

September 17, 2008

British airports operator BAA said on Wednesday it is putting London Gatwick Airport up for sale -- but vowed to fight to retain the rest of its portfolio.

 

"We have decided to begin the process of selling Gatwick Airport immediately," Colin Matthews, chief executive of Spanish owned-BAA, told reporters in Toronto.

 

Sector sources said Gatwick, one of Europe's busiest airports with 35 million passengers, could fetch between GBP2 billion and GBP3 billion pounds (USD$3.57 billion - USD$5.35 billion).

 

A string of potential buyers have already registered an interest, while Virgin Atlantic said on Wednesday it was interested in bidding as part of a consortium.

 

Frankfurt operator Fraport and German builder Hochtief have expressed possible interest, as has Singapore-owned Changi Airports International.

 

The move is a response to Britain's Competition Commission, which last month said in a provisional ruling that BAA must sell three of its seven UK airports, including two of London's Heathrow, Gatwick and Stansted and one of Edinburgh and Glasgow in Scotland.

 

BAA said it disagreed with the Competition Commission's analysis, and that it will try to keep Stansted airport to the north of London as a change of ownership could interfere with the airport's expansion.

 

The firm added that it would also "continue to present our case" in Scotland, where it also owns Aberdeen airport.

 

"At Stansted, we believe that a change of ownership would interfere with the process of securing planning approval for a second runway, which remains a key feature of government air transport policy," Matthews said.

 

Separately, in a meeting with Spanish press in Toronto, the CEO of Ferrovial Airports division Inigo Meiras said it is interested in the privatization of Spanish airports authority Aena and is also eyeing other airports outside the UK.

 

This summer the Spanish government said it would privatize 30 percent of Aena, which has been valued at EUR30 billion euros (USD$42.59 billion).

 

"We are not obviously going to look at airports in England, but outside yes we will do so."

 

Meiras also said Ferrovial expects to complete its planned GBP1.5 billion (USD$2.68 billion) bond issue before year-end.

 

(Reuters)

 

[Azreen 0]

I wonder if Malaysia Airports Bhd is among the potential buyers?

[KK Lee 5]

I wonder if Malaysia Airports Bhd is among the potential buyers?

 

MAHB provides airport management services for Astana International Airport in Kazakhstan, Delhi International Airport and GMR Hyderabad International Airport in India and Sabiha Gokcen International Airport in Turkey.

 

If MAHB can match Fraport and others offer; strategically, BAA is likely to sell Gatwick to MAHB.

 

 

[Mohd Azizul Ramli 2]

I am surprised none of the bid came from the Middle East. I was told once by a friend that Abu Dhabi Airport Corporation is very keen in getting Gatwick. Emirates Group? I thought they always want to have a hub in Europe, should come in handy as the UK has a free air travel agreement with the US.

[Pieter C. 5]

Gatwick Sale May Struggle To Find Serious Buyers

 

September 19, 2008

Ferrovial could struggle to find serious buyers for London's Gatwick Airport amid the global credit crisis, and the sale is likely to take more than a year to complete.

 

The Spanish group said this week it would sell Gatwick, Britain's second biggest airport with 35 million passengers a year, in a deal valued by some in the industry at around GBP2 billion pounds (USD$3.65 billion).

 

The move immediately prompted interest from a string of potential buyers, including Deutsche Bank infrastructure arm RREEF, airport operator Manchester Airports Group and Virgin Atlantic Airways, but analysts and other industry sources warned that it would not be an easy sell.

 

They said that although expressions of interest have come in from many different corners, the financial crisis would make it difficult for all but the cash-rich to raise the money.

 

"There are funds out there able to buy it as they will have the cash to be able to do it, but if a buyer needed to borrow funding from banks it will be very difficult," said Paul Whelan, head of industry body the Small to Medium Airports Group (SMAG).

 

Former buyers of British airports such as Australia's Babcock & Brown and Macquarie are already effectively out of the race, with the former suffering severe financial constraints and the latter ruling out further airport purchases just last month.

 

And American International Group -- the owner of half of London City Airport -- was this week the subject of an USD$85 billion bail out by the US Federal Reserve.

 

"Much of the global, corporate world -- including airports, airlines and funds -- are sobering up to the realities of the new world, where credit availability is limited," said Andrew Fitchie, transport analyst at Collins Stewart.

 

"There is interest, but whether it will manifest itself as an open cheque book at the price requested, I don't know," he added, saying airlines in particular would be looking to a low price bid in order to cut landing charges.

 

Ferrovial bought the BAA airports monopoly for GBP10 billion two years ago, valuing the seven airports at a 30 percent premium to their combined Regulated Asset Base (RAB), according to Fitchie.

 

That would mean it would need to attract a bid of more than GBP2 billion to make a profit on Gatwick, although a sale at any price would help Ferrovial pay down some of the GBP9 billion of debt racked up during the BAA purchase.

 

The Gatwick sale has been designed to pre-empt a likely order to sell up from Britain's Competition Commission, which ruled last month that the BAA monopoly was bad for competition and it should sell three of its seven airports including two of London's Heathrow, Stansted and Gatwick.

 

Douglas McNeill, transport analyst at Blue Oar, said the firm was right to take the initiative to avoid a forced sale, but warned the process was likely to be a "long and slow" as Ferrovial attempts to extract Gatwick from the rest of BAA.

 

"It will take time to fully separate Gatwick from the rest of the group. There's staff pensions, IT systems -- the pace is not going to be very fast," he said.

 

His view was echoed by an infrastructure fund source familiar with this type of deal.

 

"Gatwick needs to be a standalone business capable of competing with Heathrow... It needs to have its own set of functions that are required for a regulated airport -- it also needs to have a separate financial reporting unit, and a new retail and operations unit," the source said.

 

A spokesman for BAA reiterated that the sale was at a very early stage and conceded it might not be completed before the Competition Commission publishes its final report early next year.

 

"There is a lot of work to be done to extradite Gatwick from the BAA group. It could go past that time period," he said, referring to the months before the Commission's outcome.

 

(Reuters)

 

[Pieter C. 5]

Vancouver Airports, Citibank Eye Gatwick

 

October 27, 2008

The infrastructure fund of Citigroup and the Vancouver Airports Authority are planning a joint GBP2 billion pounds (USD$3.2 billion) bid for London's Gatwick Airport, The Sunday Times reported without citing sources.

 

Operator BAA put the London airport up for sale after Britain's Competition Commission said in a provisional ruling in August that the unit of Spain's Ferrovial must sell three of its seven UK airports.

 

A string of potential bidders, including Virgin Atlantic Airways, German builder Hochtief, Frankfurt airport operator Fraport , Deutsche Bank's infrastructure arm RREEF and Manchester Airports Group, have already expressed an interest.

 

BAA declined to comment on the report. Citigroup was not available for comment.

 

(Reuters)

 

[Pieter C. 5]

Ruling forcing BAA to sell two London airports, Edinburgh confirmed

 

Thursday December 18, 2008

The UK Competition Commission yesterday "confirmed" that it will require BAA to sell both London Gatwick and Stansted, setting the stage for a breakup of the airport operator's control of London's airports for which UK airlines long have pushed.

 

The ruling, which follows earlier CC provisional reports that pointed toward the breakup, is subject to "final consultation" but is almost certain to be issued formally in late February/early March. It also calls for BAA to sell Edinburgh. The airport operator, a subsidiary of Grupo Ferrovial, will be allowed to retain Heathrow and three other UK airports. It already has put LGW up for sale in anticipation of the CC ruling.

 

Christopher Clarke, the CC's BAA inquiry chairman, said, "The most effective way to introduce competition. . .is to require the three London airports and the two principal Scottish airports to be separately owned. . . Under separate ownership, the airport operators, including BAA, will have a much greater incentive to be far more responsive to their customers, both airlines and passengers."

 

He added that the Commission also will make recommendations to the UK Dept. for Transport "on a more effective, and ultimately more flexible, system of airport regulation." These will include a call to "adopt a license-based regime of economic regulation for airport owners to give the regulator more ability to intervene flexibly when necessary on issues such as performance and adequate financing. The license should impose a set of duties on the operator of Heathrow."

 

BAA CEO Colin Matthews questioned the finding, saying, "We do not believe that [the CC] has set out compelling evidence to support its view that [separate ownership] will increase competition and we remain concerned that its proposed remedies may actually delay the introduction of new runway capacity."

 

Airlines welcomed the finding. "The commission recognizes the unacceptable levels of service that passengers and airline customers have had to put up with for years," Virgin Atlantic Airways stated.

 

EasyJet CEO Andy Harrison warned, however, that the breakup and proposed regulatory changes "can only address part of the problem," adding, "The simple fact is that airports like Gatwick are a monopoly and simply changing the ownership will not change that fact. . .Any new owner of Gatwick will have to pay a full price and will have every incentive to exploit the weaknesses of UK airport regulation with air passengers having to pick up the bill."

 

 

[KK Lee 5]

 

May be MAHB should be forced to give up the control of LCCT to spur competition hence service level at airports.

 

 

[Ken M. 0]

I'm suprised the Commission have asked BAA to sell Edinburgh. I would have thought if Ferrovial were going to offload a Scottish airport it would have been Glasgow. Reckon Ferriovial would want to keep it's prestige capital airports LHR and EDI. EDI has gone from strength to strength in recent years attracting good trans-atlantic and European business routes. GLA has struggled to get any decent new direct European business routes. Apart from good old KLM and EK GLA is really an LCC and "bucket and spade" (holiday) airport these days which is a real shame.

 

Wonder if Ferrovial will fight the EDI selloff?

Edited December 18, 2008 by Ken M.

[Pieter C. 5]

BAA Told To Sell Stansted, Edinburgh Airports

 

December 17, 2008

Britain's anti-trust regulator told Ferrovial to sell London's Stansted and Scotland's Edinburgh airports as well as London Gatwick to break its stranglehold on key British airports but the company said it doubted the move would aid competition.

 

The Competition Commission said on Wednesday it would stick to its earlier ruling that debt-laden Ferrovial should sell three of its seven British airports to end BAA's long-standing monopoly, despite Ferrovial's pre-emptive move to sell Gatwick, which it put up for auction in September.

 

BAA, bought by Ferrovial for over GBP10 billion pounds (USD$15.57 billion) in 2006, said it disagreed with the ruling and that no evidence had been given to show that selling Stansted or Edinburgh would improve competition.

 

"We remain concerned that its proposed remedies may actually delay the introduction of new runway capacity," BAA chief executive Colin Matthews said in a statement, referring to government proposals to build a new runway at Stansted.

 

The airports operator -- which would be entitled to appeal the ruling following the publication of the Commission's final report, which is due by March 29 -- said it was continuing to make its case to the regulator.

 

When asked whether it would consider legal action over and above the appeal, a spokesman said it "was not ruling out anything."

 

Debt-laden Ferrovial said in October it had hired HSBC and Royal Bank of Scotland to advise on the sale of Gatwick, Britain's second biggest airport serving around 35 million passengers a year.

 

The move has drawn interest from a string of parties, suggesting there would also be moves for Stansted and Edinburgh if, as expected, the sale is formally ordered in the Commission's final report next year.

 

Portuguese broker BPI values Gatwick at EUR1.939 billion euros (USD$2.72 billion), Stansted at EUR1.365 billion and Scottish airports at EUR1.386 billion each, implying total proceeds of EUR3.9 billion.

 

Ferrovial's debt-pile stood at EUR28.6 billion at end September.

 

"It's favorable for them (Ferrovial) in terms of reducing debt levels. There's demand in the market for airport assets, there are several interested parties, I think they could make sales at good prices without having to resort to fire sales," said Jose Lizan, fund manager at Nordkapp Inversiones and a holder of Ferrovial shares.

 

But BPI was less confident Ferrovial would benefit from the disposals.

 

"The disposals would have to be done in a harsh market context which could depress offers from potential interested parties which may be facing difficulties in getting financing," it said.

 

The Commission said in its statement that Stansted and Gatwick should be sold to different owners, while it remained open to views on whether Glasgow should be sold rather than Edinburgh in Scotland.

 

An independent trustee will oversee the process.

 

Germany's Fraport and Hochtief, Britain's Manchester Airport Group and Virgin Atlantic Airways, as well as infrastructure funds, have all said they would consider a bid for Gatwick.

 

Recent newspaper reports have said several consortia are forming to make bids of up to GBP2 billion (USD$3.11 billion), with first round offers due in the new year.

 

(Reuters)

 

[Pieter C. 5]

Ferrovial Set To Consider Early Bids For Gatwick

 

January 19, 2009

Ferrovial, under pressure from regulators to sell London's Gatwick Airport, has received indicative offers from bidders including the operators of London City, Budapest and Chicago Midway airports.

 

But although several parties are vying for Britain's second-busiest airport, none would comment on how much they might pay, and analysts said tough credit markets and a drop in passenger numbers could crimp valuations.

 

A spokesman for Ferrovial's British airports arm BAA said first-round bids for the airport were due on Monday, but declined to comment further on the process.

 

Global Infrastructure Partners (GIP), a joint venture between General Electric and Credit Suisse and owner of London City Airport, was first to confirm a definite bid for Gatwick, which was put up for sale last year.

 

"I can confirm a bid is going in today, and will be by the deadline," a GIP spokesman said, although he would not say how much was being offered or whether GIP had any bidding partners.

 

Germany's Hochtief, the owner of Budapest Airport, later said it too had submitted a bid, also without adding further detail.

 

Another bidder is the consortium that bought a 99-year lease on Chicago's Midway Airport last year, in the first privatisation of a major US airport.

 

The consortium, made up of Citigroup unit Citi Infrastructure Investors, Vancouver Airport Services and John Hancock Life Insurance, is bidding as the Lysander Gatwick Investment Group, a spokesman said.

 

It is being advised by experts including former British Airways chief executive Bob Ayling, he said, while Spanish bank Santander is acting as financial adviser.

 

And sources familiar with the matter said Deutsche Bank's RREEF Infrastructure will make an approach in partnership with Australia's Babcock & Brown.

 

Both RREEF and Babcock & Brown declined to comment.

 

Gatwick is part of Ferrovial's seven-airport monopoly BAA, which Britain's competition regulators have proposed should be broken up. Analysts have said the Gatwick sale could net its debt-laden owner up to GBP2 billion pounds (USD$2.95 billion).

 

BAA chief executive Colin Matthews told reporters last week that there had been "serious interest" in Gatwick, which has about 35 million passengers a year.

 

HSBC and Royal Bank of Scotland are running the sales process. Sources close to BAA said the two banks would be willing to give credit of up to GBP1.6 billion pounds to a potential buyer as long as it met certain criteria.

 

Manchester Airport Group and 3i Infrastructure have both said they would look at a bid, although neither would comment further on Monday.

 

However, Frankfurt Airport-owner Fraport said on Monday it would not be making an offer.

 

The potential value of bids has been estimated at about GBP2 billion, but analysts have cautioned that achieving a premium to the Regulated Asset Base (RAB) -- a way of valuing infrastructure assets -- of GBP1.7 billion may be difficult.

 

"It remains to be seen whether GBP2 billion will be achievable... given that traffic at the airport is in free fall and given the continuing difficult state of the credit markets," Collins Stewart aviation analyst Andrew Fitchie said in a note.

 

BAA said passenger numbers at Gatwick fell 13.8 percent year-on-year in December.

 

Ferrovial put Gatwick up for sale to pre-empt a likely order to do so by Britain's Competition Commission later this year. In December the Commission also proposed the sale of London's Stansted Airport as well as Edinburgh in Scotland.

 

The Spanish company will be allowed to keep Heathrow, one of the world's busiest airports with 65 million passengers a year, where it was last week controversially awarded government approval for a third runway.

 

(Reuters)

 

[Pieter C. 5]

Hochtief Drops Gatwick Bid, First Round Ends

 

January 28, 2009

German construction company Hochtief has pulled out of the bidding for London's Gatwick Airport, leaving five suitors to enter a second round, a person familiar with the process said.

 

"It wasn't a question of valuation, but the deliverability of the proposal," the source said, declining to be more specific.

 

Gatwick was put up for sale late last year by Spain's Ferrovial under pressure from regulators.

 

First-round bids for the airport -- one of the seven British airports in Ferrovial's BAA group -- were due in last week.

 

BAA declined to comment and Hochtief was not immediately reachable for comment.

 

Analysts have said bids could be up to about GBP2 billion pounds (USD$2.79 billion), though tough credit markets and a drop in passenger numbers could mean a premium to the Regulated Asset Base (RAB) -- a way of valuing infrastructure assets -- of GBP1.7 billion may be difficult to reach.

 

The source also said that two of the bidders were Manchester Airports Group, bidding with Canada's Borealis; and 3i's infrastructure arm, in partnership with Ontario Teachers' Pension Plan and the Canada Pension Plan.

 

These two had previously declined to confirm that they were taking part in the auction. Three other groups have publicly said they are part of the process:

 

-- Global Infrastructure Partners (GIP).

 

-- Deutsche Bank's RREEF Infrastructure and a European infrastructure fund run by Babcock & Brown.

 

-- Citigroup unit Citi Infrastructure Investors, Vancouver Airport Services and John Hancock Life Insurance Company, who are bidding jointly as the Lysander Gatwick Investment Group.

 

(Reuters)

 

[Pieter C. 5]

Ferrovial Chairman Says Gatwick Sale Imminent

 

October 20, 2009

 

Spain's Ferrovial is in talks with more than one bidder for London's Gatwick airport and expects to close the sale in the next few weeks, its chairman said on Tuesday, bringing to a close a year-long sale process.

 

Gatwick, controlled by Ferrovial's British airports operator BAA, is London's second busiest airport and could fetch up to EUR1.8 billion euros.

 

"We're in advanced talks with more than one interested party and if things pan out as hoped we expect a sale in the next few weeks," chairman Rafael del Pino told journalists after a shareholders meeting.

 

Separately, banking sources in London said infrastructure fund Global Infrastructure Partners (GIP) had received a GBP1.125 billion pound (USD$1.85 billion) loan to back the possible acquisition of Gatwick.

 

BAA put Gatwick up for sale last year, just before Britain's Competition Commission ordered its sale and that of two other of its British airports due to antitrust concerns.

 

On Monday, the first day of a three-day appeal of the commission's decision, BAA alleged that one of the members of the inquiry had links to one of the Gatwick bidders.

 

However, the competition watchdog said in a document sent to reporters on Tuesday that it would argue that the airport operator knew of the links from the beginning of the 2007 inquiry and therefore has waived its right to object.

 

Ferrovial shareholders approved the appointment of Inigo Meiras as new chief executive to replace Joaquin Ayuso, who will remain with the company as non-executive deputy chairman.

 

Speaking to the press in his new role of chief executive, Meiras confirmed that BAA's property company APP Lynton is up for sale but declined to talk about valuations or timeframes for any deal.

 

(Reuters)

[Pieter C. 5]

BAA Sells London Gatwick Airport For GBP1.5 Bln

 

October 21, 2009

 

Spain's Ferrovial, under pressure to reduce its dominance in UK airports, has agreed to sell London's Gatwick airport for GBP1.51 billion pounds (USD$2.46 billion) to a consortium involving Credit Suisse and General Electric.

 

Ferrovial said on Wednesday that it expected to make a capital loss of around EUR142 million euros (USD$212.6 million) against its consolidated earnings following the sale by airport operator BAA, majority owned by the Spanish group.

 

It comes three years after it paid GBP10.1 billion (USD$16.6 billion) for BAA, which operates seven UK airports as well as international operations.

 

It put Gatwick up for sale last year after UK authorities said the company should reduce its UK airport portfolio, though BAA is currently appealing a UK Competition Commission ruling ordering it to sell Gatwick and two other airports, alleging that the decision was biased.

 

Buying Gatwick, London's second-busiest airport, is Global Infrastructure Partners (GIP), a consortium which already owns London City Airport.

 

"Head-to-head competition with Heathrow will be limited but a more focused approach on Gatwick will help to attract passengers," said GIP partner Michael McGhee.

 

"The upgrade of facilities to make it more pleasant in terms of an experience, that's a bit of a longer haul," he said, adding that some of the improvements could be done within two to five years.

 

The sale price is lower than the airport's GBP1.57 billion Regulated Asset Base (RAB) value but higher than offers BAA received from bidders before the summer.

 

Analysts said that after taking into account BAA's selling costs, the deal could represent a discount of up to 14 percent of the RAB.

 

The deal will be closely watched by governments looking to sell airports across Europe, including those in Lisbon and Prague, after the financial crisis forced many to shelve privatisations as asset values fell.

 

COMPETITION, DEBT PRESSURES

 

The UK's Competition Commission has ordered BAA to sell Gatwick, London Stansted and either Edinburgh or Glasgow airports.

 

BAA moved quickly to launch the sale of Gatwick early to ensure it would not have to put more than one of its major airports on the market at the same time, a source close to the firm said. The person said that it was also reacting to negative public opinion of its dominance over London's airports.

 

"I would be surprised if Stansted isn't under someone else's ownership by the end of next year," said a source that was involved in the Gatwick sale process.

 

Highly leveraged BAA, which reported net debt of GBP9.7 billion last June, said it would use the sale's proceeds to pay back some of its debt.

 

Most pressing for BAA is a GBP1 billion debt maturity in March 2010. It can make this payment without selling Gatwick, but analysts at Fitch Ratings have said extra funds are needed to repay a second GBP1 billion debt maturity due in March 2011.

 

"This is a first step in the deleveraging of Gatwick airport made at a price that stands above consensus numbers conveyed in the press for quite sometime," Banco BPI analysts said in a note.

 

BAA said the GBP55 million sale price was conditional on future traffic performance and GIP's future capital structure.

 

GIP secured a GBP1.125 billion loan for the acquisition from a group of 12 banks.

 

(Reuters)