GIP among several Gatwick bidders

Global Infrastructure Partners and a consortium consisting of Citi Infrastructure Investors, Vancouver Airport Services and John Hancock Life Insurance have emerged among the bidders for the UK’s second-busiest airport.

BAA has received indicative offers from multiple bidders for London’s Gatwick Airport, including the operator of London City Airport and the consortium that last year won a 99-year lease to operate Chicago’s Midway Airport.

A spokesperson for Global Infrastructure Partners (GIP), a $5.64 billion infrastructure fund whose cornerstone investors include Credit Suisse and General Electric, confirmed that GIP has put in a bid for the airport but declined to comment further.

GIP is 75 percent owner of London City Airport, which it purchased on a 50-50 basis with AIG in 2006 for about £770 million (€854 million; $1.3 billion). The two investors put in £370 million of equity and borrowed the rest of the purchase price, according to remarks made by GIP’s head, Adebayo Ogunlesi, at PEI’s Infrastructure Investor forum in October 2008.

Last year, GIP bought out AIG’s remaining stake in the airport in an all-equity transaction reportedly valued at £250 million. As of October 2008, GIP was about 35 percent invested.

London City Airport handled 2.9 million passengers in 2007 and 3.3 million passengers in 2008.

A consortium consisting of Citi Infrastructure Investors, Canada’s Vancouver Airport Services and John Hancock Life Insurance also bid for Gatwick. Bob Ayling, former chief executive officer of British Airways, joined the consortium as an advisor in their quest for the airport.

In October 2008, that consortium was awarded a 99-year concession to operate Chicago’s Midway Airport in exchange for an upfront payment of $2.512 billion.

Citi, Vancouver and John Hancock are approximately 3 percent, 89 percent, and 8 percent equity owners, respectively, in MIDCo, the private operator partnership for Midway, according to an airport privatisation application filed with the US Federal Aviation Administration in October 2008.

Those percentage ownership figures will be adjusted prior to the closing of the lease, which is expected early in the second quarter of 2009.

Financing arrangements stipulated in the FAA application call MIDCo to be capitalized at least 40 percent equity. The application was filed on an all-equity basis.

Midway Airport served 9.1 million passengers in 2007, making it the 28th busiest airport in the US, according to FAA statistics.

Deutsche Bank's RREEF Infrastructure also put in a bid in partnership with Babcock & Brown's European Infrastructure Fund.

Several other parties have expressed interest in bidding for the airport and have reportedly also put in bids, though none would confirm whether they have in fact put in a bid and if so how much.

A consortium of Canadian pension funds Ontario Teachers and Canada Pension Plan, along with 3i Infrastructure, reportedly placed a bid. 3i Infrastructure advisor Michael Queen had previously expressed interest in doing a deal for Gatwick on a call with reporters in November 2008 but a spokesperson for 3i declined to comment on whether the firm placed a bid.

Hochtief AirPort, a subsidiary of Hochtief, the largest construction group in Germany, also reportedly placed a bid. In the summer of 2007, it bought Budapest Airport from the BAA and is an investor and manager of a number of other privatized airports worldwide.

A spokesperson for Hochtief did not return calls seeking comment.

Manchester Airport Group has also been reported as a bidder for Gatwick.

Gatwick is the second-largest airport in the UK by passenger volume. Last year it handled 34.2 million passengers.

A spokesperson for the company previously told InfrastructureInvestor that the sale of the airport had garnered significant interest from multiple bidding groups and would likely exact a “significant premium” to the asset’s bidding floor of £1.7 billion to £1.75, as measured by the regulated asset base.

Despite this, Dow Jones has reported that bids for Gatwick likely came in well short of £2 billion.

BAA declined to comment on the process.