Lysander elimination leaves GIP and MAG in face off over Gatwick
15 May 2009
With the elimination of the Citi Consortium, known as the Lysander consortium from the auction for BAA Ltd's London Gatwick airport the competition has narrowed down to two bidders, Global Infrastructure Partners (GIP) and Manchester Airport Group (MAG).
The Lysander consortium comprising Citi Infrastructure Partners, Vancouver Airport Services and John Hancock Life Insurance, is understood to have offered a low bid that raised doubts over its development plans for Gatwick. Lysander has termed the decision ''bizarre in the extreme.''
BAA, which owns the airport, is said to be working closely with the Competition Commission in deciding the next owner. In February, it had been forced by the commission to put up several of its airports for sale, although it had put already put up Gatwick for sale last year in anticipation of an order from the commission.
BAA has upto next Monday to appeal against the commission's decision, if it wants to contest such a large break-up of the group. Sources point out that it could contend that all bids were low as the bidders have reportedly offered between £1.3 billion and £1.4 billion for Gatwick, which is on the lower side of the £1.6 billion regulated asset value of the airport. Lysander is thought to have bid less than £1.3 billion. Lysander has meanwhile pointed out that its bid was the only one of the three that was fully financed.
Citigroup's elimination comes in the wake of its pull out of a $2.52 billion agreement to lease Chicago Midway airport after failing to raise financing last month. The New York-based bank has seen 85 per cent erosion of its value in the past year and would need $57 billion more of common equity in case US recession worsened, according to government stress tests.
The auction of Gatwick, Britain's second-largest airport, has had a difficult passage so far with the credit crunch and declining passenger numbers dampening interest. Sources say BAA will likely fall much short of the £2 billion it is seeking. BAA's expectation is higher than the valuation by the UK Civil Aviation Authority.
Meanwhile passenger numbers at Gatwick have fallen 12 per cent in the first four months according to BAA. The decline has been worsened by an 'Open Skies' agreement between the US and the European Union that led to some carriers switching to the company's London Heathrow airport, which is the biggest in the region.
The bid is now a straight fight between Global Infrastructure Parnters (GIP), a joint-venture between Credit Suisse and General Electric; and Manchester Airport Group, a consortium of Manchester Airport Group, the Greater Manchester Pension Fund and Canadian infrastructure investor Borealis.
