British airports operator BAA said on Wednesday it was putting its London Gatwick airport up for sale, but would resist regulatory pressure to sell other parts of its portfolio.
“We have decided to begin the process of selling Gatwick Airport immediately,” Colin Matthews, chief executive of BAA, which is owned by Spain’s Ferrovial, told reporters in Toronto. Some in the industry have said Gatwick, one of Europe’s busiest airports, serving 35 million passengers a year, could fetch £2 billion to 3 billion ($3.57-$5.35 billion).
Analysts at Collins Stewart, however, said they would be wary about factoring in a sale price above £2 billion, pointing out that the value of the airport’s assets, as calculated by regulators, was just over £1.5 billion. “Ferrovial bulls think up to £3 billion could be achievable, based on ‘unregulated’ peak cycle values ... We think this is unlikely,” said the analysts, who have a ‘sell’ recommendation on Ferrovial shares.
“(We) see this sale as 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,” they wrote in a research note. A BAA spokesman said the deal process was at a very early stage, with the company yet to appoint advisers or evaluate any of several expressions of interest received.
Virgin Atlantic said it was interested in bidding as part of a consortium, while German builder Hochtief added it was “considering getting involved” in the sale process. Frankfurt operator Fraport said it remained interested in London airports. A spokesman for Manchester Airports Group said it would look at a possible bid if it added value for shareholders, while an industry source told Reuters it was “logical” that Global Infrastructure Partners (GIP), the consortium that owns London City Airport, would also look at a deal. Singapore-owned Changi Airports International has declared an interest in the past, but was not immediately available for comment on Wednesday.
KEEP ALL SIX
The sale 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 would try to keep all six of its remaining airports after the Gatwick sale, adding that a change of ownership at Stansted to the north of London could interfere with the airport’s expansion. “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.
The Competition Commission said in a statement that its investigation continued and that it would publish its final report and remedies in early 2009, taking into account any action that BAA takes in the meantime. Separately, in a meeting with Spanish press in Toronto, the CEO of Ferrovial Airports division Inigo Meiras said it was interested in the privatisation of Spanish airports authority Aena and was also eyeing other airports outside the UK.
This summer the Spanish government said it would privatize 30% of Aena, the whole of which has been valued at €30 billion ($42.6 billion). “We are not obviously going to look at airports in England, but outside, yes, we will do so,” Meiras said. Meiras also said Ferrovial expects to complete its planned £1.5 billion ($2.68 billion) bond issue before year-end. Shares in Ferrovial initially rose as much as 6.7% on the news, but by 1105 GMT stood just 2.6% higher. (Reuters)