Spain's Ferrovial, under pressure to reduce its dominance in UK airports, has agreed to sell London's Gatwick airport for GBP1.51 billion pounds (USD$2.46 billion) to a consortium involving Credit Suisse and General Electric.
Ferrovial said Wednesday that it expected to make a capital loss of around EUR142 million euros (USD$212.6 million) against its consolidated earnings following the sale by airport operator BAA, majority owned by the Spanish group.
It comes three years after it paid GBP10.1 billion (USD$16.6 billion) for BAA, which operates seven UK airports as well as international operations.
It put Gatwick up for sale last year after UK authorities said the company should reduce its UK airport portfolio, though BAA is currently appealing a UK Competition Commission ruling ordering it to sell Gatwick and two other airports, alleging that the decision was biased.
Buying Gatwick, London's second-busiest airport, is Global Infrastructure Partners (GIP), a consortium which already owns London City Airport.
"Head-to-head competition with Heathrow will be limited but a more focused approach on Gatwick will help to attract passengers," said GIP partner Michael McGhee.
"The upgrade of facilities to make it more pleasant in terms of an experience, that's a bit of a longer haul," he said, adding that some of the improvements could be done within two to five years.
The sale price is lower than the airport's GBP1.57 billion Regulated Asset Base (RAB) value but higher than offers BAA received from bidders before the summer.
Analysts said that after taking into account BAA's selling costs, the deal could represent a discount of up to 14 percent of the RAB.
The deal will be closely watched by governments looking to sell airports across Europe, including those in Lisbon and Prague, after the financial crisis forced many to shelve privatizations as asset values fell.
COMPETITION, DEBT PRESSURES
The UK's Competition Commission has ordered BAA to sell Gatwick, London Stansted and either Edinburgh or Glasgow airports.
BAA moved quickly to launch the sale of Gatwick early to ensure it would not have to put more than one of its major airports on the market at the same time, a source close to the firm said. The person said that it was also reacting to negative public opinion of its dominance over London's airports.
"I would be surprised if Stansted isn't under someone else's ownership by the end of next year," said a source that was involved in the Gatwick sale process.
Highly leveraged BAA, which reported net debt of GBP9.7 billion last June, said it would use the sale's proceeds to pay back some of its debt.
Most pressing for BAA is a GBP1 billion debt maturity in March 2010. It can make this payment without selling Gatwick, but analysts at Fitch Ratings have said extra funds are needed to repay a second GBP1 billion debt maturity due in March 2011.
"This is a first step in the deleveraging of Gatwick airport made at a price that stands above consensus numbers conveyed in the press for quite sometime," Banco BPI analysts said in a note.
BAA said the GBP55 million sale price was conditional on future traffic performance and GIP's future capital structure.
GIP secured a GBP1.125 billion loan for the acquisition from a group of 12 banks.
