London's Gatwick Up For Sale

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London's Gatwick Up For Sale
Javier Espinoza, 09.17.08, 9:30 AM ET

LONDON - Grupo Ferrovial, owner of British airport operator BAA, has reluctantly put London's Gatwick airport up for sale under the direction of British regulators. It's a little inconvenient for Ferrovial, considering how volatile equity and financial markets have been recently, but the Spanish infrastructure company could still get a fair price.

"Although the current financial situation could affect the valuation of airport, this is a very attractive asset, an airport at full capacity in a market hungry for this type of investment," said Victor Acitores, an analyst with Landsbanki Kepler in Madrid.

Press reports said some of the potential bidders include Richard Branson's Virgin Atlantic, Australian bank Macquarie (other-otc: MQBKY - news - people ), Germany's Fraport, and Manchester airport.

"We have decided to begin the process of selling Gatwick Airport immediately," BAA Chief Executive Colin Matthews said in a press release on Wednesday. "Gatwick is one of Europe's premier airports, the busiest single-runway airport in the world, and it was used by 35 million passengers last year."

Shares in Grupo Ferrovial (other-otc: GRFRF - news - people ) rose 3.9%, or 1.27 euros ($1.80), to 33.78 euros ($47.98), on Wednesday morning in Madrid.

Analysts consulted by Forbes.com said Gatwick could fetch a price of 16 times its earnings before interest, taxes, depreciation and amortization, or 2.7 billion pounds ($4.8 billion); regulators have valued the airport at 1.8 billion pounds ($3.2 billion). Gatwick could be sold in the summer of 2009 at the earliest, but it is likely that Ferrovial will try to delay the sale as long as it can to get a better price as Gatwick grows year on year, analysts said.

Andrew Fitchie, an analysts with Collins Stewart in London, cautioned in a note to clients about expecting a price tag of 2.0 billion pounds ($3.6 billion). He said the sale was, "an indictment of a failed expansion strategy which leaves the group overloaded with debt at a time when cyclical pressures are bearing down across its operations."

Britain's main competition authority recently recommended that Ferrovial sell two of its three London airports--Heathrow, Gatwick and Stansted--as well as another in Scotland, after concluding that the Spanish firm's British airport subsidiary unfairly distorted the workings of the market. (See "Branson Eyes An Airport.")

Ferrovial sold the George Best Belfast City airport to ABN Amro Global Infrastructure Fund for 132.5 million pounds ($188.54) earlier this month, for four times the purchase price.

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