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BUYERS QUEUE UP FOR BAA'S AIRPORTS

Heathrow airport

Thursday August 21,2008

By Andrew Johnson

A £5billion bidding war was declared yesterday to break up the owner of Heathrow, Gatwick and Stansted after competition watchdogs ruled the three airports must compete with each other.

The Competition Commission said airports operator BAA had to sell two of its three London sites to stop it enjoying a monopoly on some of the busiest airports in the world.

BAA, bought for £10.3billion by Spanish group Ferrovial two years ago, must also sell either Glasgow or Edinburgh, the Commission recommended in an interim report on its investigation.

Potential bidders are already queuing up for the airports, even though the commission will not reach a final decision until next year.

BAA said it had “no intention” of selling Heathrow, leaving Gatwick and Stansted as the London two on the block.

Blue Oar analyst Douglas McNeill said Gatwick was worth about £3billion and Stansted £2billion. The Scottish pair are worth about £900million combined, with Glasgow the more profitable.

Among possible buyers are Manchester Airports Group; Changi Airports International, owned by the Singapore government, and Frankfurt airport operator Fraport. All have expressed an interest in buying.

Germany’s biggest construction group, Hochtief, and London City Airport-owner Global Infrastructure Partners, a joint venture between Credit Suisse and General Electric, will also consider a purchase.

Another possibility is Australian bank and infrastructure group Macquarie. However, its airport division is hoping to sell assets to pay down debt, although analysts pointed out it could be building a war chest.

3i’s Infrastructure fund could also take a look, although City sources said the money needed is likely to be too much. McNeill said it was highly likely two or more interests would combine to launch a joint bid for the airports.

Ferrovial insisted it would hold out for a full price, but Collins Stewart analyst Andrew Fitchie said its problem was that it would be a forced seller and airport valuations were falling.

McNeill added financing could prove a problem, with banks unwilling to lend, but banking insiders said airports, especially in the South of England, were very rare and saleable because of planning restrictions and environmental concerns.

BAA recently refinanced £13.3billion of debt without too many problems. The bankers to that deal, Royal Bank of Scotland and Citigroup, are favourites to handle a sell-off.