The £1.3-£1.4 billion bid made for Gatwick airport, by Global Infrastructure Partners (GIP), the owner of London City airport has been rejected by BAA, according to sources familiar with the matter.

The fully financed offer was turned down on Sunday, 17 May on grounds that it was too low. The details are not yet public.

BAA which operates London's Heathrow and Stansted airports was expecting at least £1.5 billion according to one of the sources.

BAA said yesterday that it will appeal a UK antitrust ruling forcing the sale of three of its airports by spring 2011 as it had not factored in the 'adverse financial impact' of divesting assets in a recession. However, it said that the sale of Gatwick, the UK's second-busiest airport would not be affected.

Manchester Airport Group (MAG) is now the only remaining bidder for Gatwick after the exit of Citi Infrastructure Investors last week.

BAA rejected the offer from Citi Infrastructure as uncompetitive with no assurances on deliverability.

Airport Breakup
In March the Competition Commission called on BAA to dispose off Gatwick, Stansted and either Endinburgh or Glasgow airport in Scotland to end its market dominance.

BAA had been acquired for 10.1 billion pounds by Ferroial in 2006.

After the break up, BAA would be left with Heathrow, Southampton and Aberdeen airports.

According to the sources, GIP was still interested in the Gatwick assets. Citi's Lysander group had also evinced interest even after it's offer was rejected. It had full funding in place for the purchase.

BAA said on Tuesday that Global Infrastructure Partners could re-bid as if it was interested as there were no restrictions preventing such a bid.

Earlier BAA had said that it was considering raising a 'significant premium' over the ?1.64 billion pound value the UK Civil Aviation Authority had fixed for Gatwick.
 
The only consortium now in the fray comprises Manchester Airports Group and Borealis Infrastructure, part of pension fund Ontario Municipal Employees Retirement System.

Last September when BAA launched the sale process, it was expected to attract bids up to £1.8 billion and till recently had been aiming to secure bids close to £1.6 billion, the estimated value of the regulated asset base of Gatwick.

The latest revised bids quoted by GIP and MAG in the £1.36 billion -£1.4 billion range have been short of the target by more than £200 million while the Lysander consortium led by Citi Infrastructure Investors, was ejected when its £1.18bn offer fell behind the rival bids.

Both Lysander and GIP bids were fully funded, while the MAG consortium is yet to finalise agreement with all the banks in its debt consortium.