ADIA Gatwick sale part of ‘classic equity syndication’

Global Infrastructure Partners (GIP) has completed its second sale of a minority stake in London’s Gatwick airport this week, this time by selling a 15 percent stake in the airport to the Abu Dhabi Investment Authority (ADIA) for £125 million (€143 million; $196 million).

Gatwick: a “classic equity syndication”

A source close to the process told InfrastructureInvestor the sale, together with the recently announced deal to sell a 12 percent holding in the airport to South Korea’s National Pension Service for £100 million, is part of an equity syndication that was planned by GIP ever since it purchased Gatwick from Spanish group Ferrovial for £1.51 billion.

“This is a classic equity syndication on GIP’s part,” said the source, “and functions in much the same way as a bank syndication. GIP bought the whole of Gatwick; interested parties then came in and did their due diligence and acquired the stakes. I believe the deal with ADIA has even been signed. ADIA was always interested in Gatwick and even approached several of the potential buyers during the sales process. But in the end, they didn’t want to be directly involved in a big, M&A-type acquisition,” the source explained.

The sales are in line with GIP partner Michael McGhee’s comments last December, when he said the fund was considering the possibility of doing an “equity syndication”. In this sense, the Gatwick deals are effectively a pre-planned sell-down and differ from GIP’s sale of a 25 percent consideration in London's City airport, the source said.

In that case, GIP acquired a 50 percent stake in the airport from equal partner AIG, after the insurer ran into trouble following the financial crisis. Following acquisition of full ownership in City airport, GIP then sold a minority stake to New York’s Highstar Capital.

Following the divestments, GIP will have successfully syndicated 27 percent of Gatwick’s equity for £225 million. The source suggested these two syndications would be the largest but didn’t exclude the sale of other, smaller positions.

ADIA is Abu Dhabi’s sovereign wealth fund and is said to have more than $600 billion in assets. The acquisition is as part of its stated goal of taking minority positions in infrastructure assets. South Korea’s National Pension Service is the world’s fifth-largest pension fund with some $240 billion in assets.

The pension’s chief executive said in an interview earlier this week that the Gatwick acquisition is part of its plans to increase investments in infrastructure, real estate and private equity funds to 6.4 percent this year from 4.5 percent at the end of last November. The move comes as the pension fund wants to boost its portfolio to $400 billion in assets by 2014, the UK being a prime target for expansion, the chief executive said.