Gatwick airport bidders raise pressure on Ferrovial
by Spain’s Ferrovial, has intensified amid the apparent withdrawal of the last
bidder from the contest.
£1.4bn, leaving a gap of at least £100m ($164m) to the price being sought by BAA,
the UK airports group and a subsidiary of Ferrovial.
Electric which already owns a 75% stake in London City airport, the main rival bidder,
pulled back from the contest in May, when its final bid of around £1.36bn was
not accepted by Ferrovial.
attractive airport assets on the market, but have been reluctant to meet the target
price set by BAA given the rapid deterioration in the airport’s traffic performance
during the recession and the gloomier prospects for its growth.
in their price ambitions, as the Gatwick sell-off has been hit by the credit crunch,
increasing bidders’ difficulties in raising bank debt, and by the recession.
the first 6 months compared to the same period a year earlier.
bids of up to £1.8bn, and it has remained reluctant in recent weeks to lower the
price below the £1.6bn estimated value of the regulated asset base at Gatwick.
with getting a price around the regulated asset base. It has a couple of windows
to close the deal. It can try now or again in September or October”.
GIP and Citi have held abortive talks with the MAG/Borealis team about joining
forces to present a single common bid.
group seeks to complete a deal by the autumn, several months later than its original
and BAA to complete a sale.
of Gatwick would greatly facilitate the refinancing.
to dispose of three of its seven UK airports within two years, Gatwick, Stansted
and either Glasgow or Edinburgh.
– it controls seven UK airports: Heathrow, Gatwick and Stansted in London, Southampton,
and in Scotland Glasgow, Edinburgh and Aberdeen – and the case is due to be heard
by the Competition Appeal Tribunal in mid-October.
impact of introducing competition”, in particular by requiring it to sell three
airports within two years “in the current financial and economic circumstances”.
it runs the risk the Commission will appoint a divestiture trustee to force through
the sale and BAA will lose control of the sale process and the break-up of the
of Gatwick airport, a key option in curbing borrowings of around £12bn, was left
with only one would-be buyer following the withdrawal of a consortium led by Manchester
Airports Group (MAG).
of £1.5bn – £100m more than the owner of Manchester airport was willing to offer.
T he departure of MAG leaves BAA dependent on one suitor whose involvement in
the process has been shrouded in uncertainty for months.
in Gatwick, but it is not known whether it is in formal talks with BAA. It was
angered by the airport group’s decision in May to appeal a Competition Commission
ruling that it must sell Gatwick, Stansted and either Glasgow or Edinburgh airports
over the next two years.
to be in the same range as the MAG consortium, which includes Canadian infrastructure
£9.5bn that are secured against its London airports, including Heathrow. A £4.4bn
refinancing facility within the debt structure created to house BAA’s London assets,
BAA (SP), requires payments of £1bn a year up to 2013. The first payment is
due in March next year and BAA has earmarked the proceeds from the Gatwick sale
for that purpose.
raising new debt in order to meet the payment schedule. BAA is saddled with
total borrowings of around £12bn after a consortium led by Ferrovial, the Spanish
infrastructure group, loaded the business with debt in order to finance its acquisition
for £10.3bn in 2006.
government has proposed a “special administration” regime which, in the event
of BAA going bust, would give ministers powers over the group’s airports. BAA’s
creditors have expressed concerns over proposals that would deny them the right
to sell Heathrow in order to recover their loans.
the credit market was alarmed by the plans. It said: “Creditors have indicated
that certain of the reforms would, if implemented in their current form, adversely
affect their existing rights and materially shift the balance of risk and reward
from the basis upon which they invested.”
would be damaged by the withdrawal of MAG. “Selling Gatwick is an important part
of BAA’s debt reduction plan, and it needs to keep as many bidders as possible
interested in order to maximise price,” he said.
asset base – or RAB – which gives the airport a value of just under £1.6bn.
BAA had initially targeted a sale at a premium to the RAB price, but it is becoming
increasingly likely that it will have to settle for around £1.4bn or scrap the
sale process entirely.
source close to the discussions said MAG’s exit could be a negotiating tactic
to force BAA into accepting a bid of around £1.4bn. MAG declined to comment but
it is understood the consortium is still interested in Gatwick, albeit at a lower
year, when it attends an appeal tribunal against the Competition Commission ruling
in October. Colin Matthews, BAA’s chief executive, described the imposition of
a partial break-up as “flawed” earlier this year and indicated that the group
might struggle to sell three airports by the middle of 2011.
three transactions in a difficult market environment,” he said.