EMEA: GIP close to Gatwick Airport sale

15 October 2018 - 12:00 am UTC

Global Infrastructure Partners (GIP) is close to an agreement to sell its 42% stake in London’s Gatwick Airport, sources said. 

The New York-headquartered infrastructure investor has been in advanced talks over the sale of its stake in the airport and could announce an agreement on the sale in coming weeks, two sources following the process said.

A newswire report late last week said GIP is nearing agreement to sell the stake to a consortium including co-investors in the airport as well as investors in GIP itself. The other shareholders in Gatwick are ADIA (15.9%), CalPERS (12.7%), National Pension Service of Korea (12.1%) and the Future Fund (17.2%).

GIP declined to comment. Other shareholders in Gatwick and shareholders in GIP either declined to comment or could not be reached for comment. 

GIP holds its stake in Gatwick via its first USD 5.6bn (EUR 4.9bn) fund, which matured last year but can be extended to 2019. Shareholders in the fund include Swiss bank Credit Suisse and the US conglomerate General Electric.

A sale of Gatwick, the UK’s second biggest airport after Heathrow, would be a major test of investor appetite for UK airports, which have recently been achieving high valuations.

Analysts and investors do not expect Gatwick to achieve the reported 45 times EBITDA multiple that GIP received for London City Airport in 2016, largely due to Gatwick’s lack of spare runway capacity, which limits future passenger volume growth.

Gatwick has been pushing to be allowed to build a second runway, but the UK government recently instead opted to allow Heathrow to build a third runway. But Gatwick, which is operating close to capacity, is due later this week to unveil plans to use its emergency runway to increase capacity.

Analysts say a 20 times multiple is a more likely price for the Gatwick stake.  Based on Gatwick’s circa GBP 373m EBITDA for 2017, this values the entire airport at almost GBP 7.5bn. Gatwick has a regulatory asset base of around GBP 3.7bn.

GIP also owns Edinburgh Airport in the UK and is understood to be planning to sell it in the near future. GIP is understood to be hoping to sell Edinburgh Airport for around 30 times EBITDA. 

Recent transactions involving UK airports include AMP Capital in April acquiring a 49% stake in the leasehold concession London Luton Airport for an enterprise value of around GBP 1bn, less than 15 times the airport’s forecast 2018 EBITDA.

AMP Capital last year also acquired Leeds Bradford Airport for an enterprise value of around GBP 220m, around 20 times EBITDA.

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