Financial Times

BAA sells Gatwick for £1.5bn

By Pilita Clark and Mark Mulligan

Published: October 20 2009 23:25 | Last updated: October 21 2009 22:33

Ferrovial has sold London’s second-largest airport for £1.5bn, as much as 25 per cent less than it had suggested Gatwick would fetch when it went up for sale just over a year ago.

Global Infrastructure Partners, the fund backed by Credit Suisse and General Electric which on Wednesday bought Gatwick, has promised to upgrade services at the airport.

Ferrovial led a consortium that paid £10.3bn, excluding debt, for airports operator BAA, which owned Gatwick, at the peak of the credit bubble in June 2006. The Spanish infrastructure group said in a regulatory filing that it would take a €142m (£129m) charge for the sale.

That would account for the difference between the sale price and the book value at the end of June, which was calculated based on the value of the airport’s assets that are regulated by the UK’s Civil Aviation Authority.

Ferrovial and its partners – Singapore’s government investment arm and Quebec’s state pension fund – had been seeking £1.8bn- £2bn when they opened the bidding process for the airport in September last year.

However, potential bidders for Gatwick found it difficult to arrange financing, and the auction coincided with dramatic drops in business travel.

Tentative offers for Gatwick came in as low as £1.2bn.

About two-thirds of Ferrovial’s net debt of €23.3bn is accounted for by BAA.

However analysts noted that the proceeds of the sale, which Ferrovial hopes to complete by early December, will do nothing to reduce the parent company’s financial gearing of net debt of more than 9 times this year’s estimated earnings before interest, taxes, depreciation and amortisation, since it will also lose the cash flows BAA earns from Gatwick.

Instead the main benefits to Ferrovial of the sale will be operational: with the disposal agreed, it can concentrate on other cash-generating plans, including the re-absorption of Cintra, the separately-listed toll road operator, and the sale of a range of assets around the world.

Citi, in a note to clients, said it was “good to get the uncertainty [about the Gatwick sale] out of the way”.

Colin Matthews, chief executive of BAA, said in a statement the airport operator would focus on improving Heathrow and its other airports.

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