Citi Infrastructure Partners has been eliminated from the auction to acquire Gatwick Airport after failing to meet the valuations of two rival bidders.
Citi’s Lysander consortium, also comprising Vancouver Airport Services and John Hancock Life Insurance, was one of three bidders in contention for the airport, alongside Global Infrastructure Partners (GIP), which owns London City Airport, and a joint venture between Manchester Airports Group and Borealis.
Vendor BAA said this morning the group had been eliminated from the process after submitting a bid which significantly undervalued the West Sussex airport and was not competitive with the two rival bids. It added that it has concerns over the deliverability of Lysander’s bid, although declined to go into further details over the concerns.
Lysander’s bid is understood to be in the region of £1.18 billion, falling short of the two rival bidders’ proposals, understood to be in the £1.3 – £1.4 billion range.
Douglas McNeill, transport analyst at Blue Oar Securities, told Infrastructure Investor: “BAA must be confident that its alternatives to the Lysander bid offer it better value and no less certainty of delivery.” He added: “That represents positive progress given the current shortage of infrastructure finance – though that factor will be reflected in the price.”
Neither of the two remaining bidders is expected to offer a proposal matching Gatwick’s £1.58 billion Regulated Asset Base.
Infrastructure Investor understands that BAA’s concerns over the deliverability of the Citi consortium’s proposal relate to the financing package behind the group’s bid. Although a Lysander spokesperson described the seller’s decision as “bizarre”, claiming it was the only fully-funded bid, one source close to the deal stated that the equity portion of the bid had not been arranged.
The spokesperson said its bid was the only one which could have delivered the required customer service facilities to the airport over the long-term. The spokesperson added that the group remains willing to negotiate and is still interested in acquiring Gatwick.
Another source close to the deal said that Lysander, whose lead financial advisor is Santander, had over 10 supporting banks already in place. Some of these banks are now likely to be approached by the remaining two bidders.
BAA is being advised on the auction by HSBC and RBS. GIP is being advised by Credit Suisse and JP Morgan, while the Manchester Airports Group/ Borealis bid is being advised by Dresdner Kleinwort.
Last month a Citi-led consortium pulled out of a deal to acquire a 99-year lease of Midway Airport in Chicago after it failed to secure the $2.52 billion all-equity financing to meet the upfront lease payment.
BAA’s appeal against the Competition Commission’s decision that it sell Gatwick, Stansted and either Glasgow or Edinburgh airports is due on May 19.