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Gatwick expected to sell for 25 percent less

Three rival consortia will make bids for Gatwick today, but all offers are expected to be considerably below the £2bn plus tag originally sought by BAA.

Analysts predict bids will range between £1.4bn and £1.5bn, well below the level of more than £2bn plus initially sought by BAA.The valuation of the airport has been forced down by the rapid deterioration in its operating performance in the past six months, as passenger volumes have fallen sharply.
The consortia are Global Infrastructure Partners, owner of London City Airport; Lysander Investment Group, which includes Citigroup and Vancouver Airports; and Manchester Airport Group in partnership with Borealis, a Canadian pension fund.
The valuation of the Gatwick, the UK’s second largest airport, has been plummeted since BAA put it up for sale last September as passenger volumes have fallen sharply, with numbers falling 17.7 percent last month compared to March 2008.

Meanwhile, the tougher lending market has forced bidders to increase their level of equity in order to make viable offers.

The problems faced by potential buyers of Gatwick were highlighted this week by the collapse of a previously-agreed $2.5bn privatisation of Chicago Midway airport. One of the consortiums included Lysander Investment Group, which is also in the Gatwick bidding.
BAA could yet appeal against the ruling that it must sell Gatwick. Colin Matthews, BAA chief executive, said the company would make a decision by the end of May. “We might have to appeal if we reach the conclusion that it is simply not practical to proceed,” he said. “It is not just a question of whether we agree or not with the Competition Commissioner’s analysis, it is also a question of the practicalities of selling three airports in the current, extraordinarily tough conditions.”