BAA has agreed to sell Gatwick, the UK’s second busiest airport, to London City Airport’s owners Global Infrastructure Partners (GIP) for £1.51bn – almost £300m less than the original asking price. BAA, which is owned by Spanish infrastructure group Ferrovial, will use the much-needed proceeds from the sale to pay off a portion of its debt, which currently stands at around £10bn. And with plans already underway for a new runway in its quest to boost passenger numbers, the sky could be the limit for GIP…
BAA’s chief executive Colin Matthews reckons that the company can now focus on improving its flagship Heathrow operation, and its other airports. It won’t want to be leaving Gatwick too much in the shade though: a chunk of the sale price is conditional on the airport’s future performance. Approximately £10m is dependent on traffic performance and £45m is down to GIP’s future capital structure – so basically if improved market conditions mean the buyer can make more dosh, then BAA will reap the rewards, too.
That said, the £1.51bn price tag fell well below BAA’s original asking price of £1.8bn. But given that this is a shockingly bad time to be selling off big ticket assets, BAA has done well to secure a sale at all. As recently as Monday, here at MT we pointed out that they had been struggling to do so – probably just as GIP was signing the cheque. Oh well, you can’t win ‘em all.
The sale marks the end of an era for BAA which has enjoyed a 40-year monopoly of London’s three main airports. Although the sale is unlikely to make much difference to the firm’s ongoing court case with the Competition Commission over whether it should have to sell a further two other airports.
Ferrovial could be excused for thinking that it’s landed itself with a bit of a turkey with BAA. Since it acquired the company in 2006 things have gone from bad to worse, with the recession hitting particularly hard. The group borrowed nearly the entire £10.2bn it paid for the company, and had difficulty refinancing when the downturn hit. Gatwick was chosen to be sold off as its passenger numbers were dropping off anyway.
GIP’s management on the other hand are probably feeling quite pleased with themselves – they’ve put themselves on a much stronger competitive footing, at a bargain price to boot. Happy landings!
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