Citi Infrastructure Out of Gatwick Race

LONDON (Reuters) – A consortium led by Citigroup’s infrastructure fund was dropped on Wednesday from the battle to buy London’s Gatwick airport, leaving just two groups vying to take over Britain’s second-busiest airport.

The decision is a fresh blow for the Citi Infrastructure Investors fund and its ally, Vancouver Airport Services, which only weeks ago saw their winning bid for Chicago’s Midway airport collapse because they could not secure financing.

Gatwick owner BAA, majority owned by Spain’s Ferrovial, said the bid from the consortium, known as Lysander Gatwick Investment Group, was “uncompetitive on price and there were no assurances on deliverability.”

But a spokesman for the consortium criticized the decision as “bizarre in the extreme.”

“Our bid is the only one fully funded and will deliver the airport’s promised capital expenditure,” he added, although he would not comment on the level of the bid.

Boston-based John Hancock Life Insurance Company, an initial member of the bidding group that also co-bid for Chicago Midway, left the consortium at the end of January, the spokesman added. The insurer could not immediately be reached for comment.

Gatwick’s Regulated Asset Base (RAB), a way of valuing infrastructure assets, is 1.6 billion pounds ($2.43 billion), but analysts have said it is unlikely to fetch that much, with debt scarce and airline traffic down sharply.

Some press reports have put the Lysander bid at just under 1.2 billion pounds.


Sources familiar with the matter earlier told Reuters that Lysander had been eliminated from the bidding by airports operator BAA because of concerns about the value of its offer. Lysander had been advised by Santander.

The two remaining bidders are Global Infrastructure Partners (GIP), the fund that owns London City Airport; and a team made up of Manchester Airport Group (MAG), Canada’s Borealis and the Greater Manchester Pension Fund.

Gatwick carried 35 million passengers in 2008, but its numbers have been in freefall as the economic downturn takes its toll. Traffic for the four months between January and April is down 11.5 percent year on year.

BAA said it was “progressing discussions” with remaining bidders.

BAA put Gatwick up for sale in September to pre-empt a regulator-demanded breakup of the monopoly, which was eventually delivered in March this year.

BAA Chief Executive Colin Matthews said at the time that the firm would consider for two months whether to appeal the ruling, which also demands the sale of London’s Stansted and one of Edinburgh or Glasgow.

The two-month deadline is up on Tuesday, May 19.

($1=.6592 Pound)

By John Bowker and Quentin Webb
(Editing by Luke Baker and Jon Loades-Carter)