Canadian-led consortium wins London City Airport

GIP has sold the UK hub to a group that includes AIMCo, OMERS, OTPP and KIA for an estimated 28x.

A team of direct investors from Canada and the Gulf is set to acquire London City Airport (LCY) from Global Infrastructure Partners (GIP).

The winning consortium comprises Canada’s Alberta Investment Management Corporation, the Ontario Municipal Employees Retirement System and Ontario Teachers’ Pension Plan as well as Wren House Infrastructure Management, the infrastructure investment arm of the Kuwait Investment Authority.

No value has been disclosed for the transaction, but sources close to the matter told Infrastructure Investor the airport has been sold for about £2 billion ($2.8 billion; €2.5 billion). That would value the business at an estimated 28x EBITDA, which stood at £72 million in 2015.

All members of the consortium declined to comment.

The agreement concludes a heated race involving some of the world’s largest direct investors. The winning consortium is understood to have trumped a rival offer by a Public Sector Pension Investment Board-led group, as well as bids by Hong-Kong based conglomerate Cheung Kong Infrastructure and China’s HNA, the owner of Hainan Airlines.

The deadline for submitting bids was last Friday.

The transaction will see GIP divest its entire 75 percent stake in LCY, which the US fund manager acquired in two successive rounds in 2006 and 2008. The firm already held a controlling interest after closing the first deal, when it partnered with AIG Financial Products Corporation to buy the airport from Irish financier Dermot Desmond for £742 million.

Market observers have suggested the hefty price tag associated with the asset may factor in future expansion at the inner-city airport, which reported an 18.8 percent rise in passenger traffic last year to 4.3 million.

However, uncertainty has emerged over plans to boost capacity at the airport to 6 million after London Mayor Boris Johnson vetoed the scheme. LCY is currently appealing the decision.

Willie Walsh, chief executive of British Airways parent International Airlines Group, has also warned he might pull aircraft out of the hub should higher fees be charged by the new owner in an attempt to recoup the high price. British Airways is LCY’s biggest airline.

Highstar Capital, now part of Oaktree Capital Management, has also agreed to sell its 25 percent stake in the business through the transaction. The deal is not subject to regulatory approval.