BAA cuts its debt pile with sale of Gatwick for £1.5bn

London City owner GIP promises to invest in modernising airport

The airports operator BAA confirmed yesterday it will sell Gatwick airport to Global Infrastructure Partners, the private equity firm that already owns London's City airport.

A Competition Commission investigation is likely to find in favour of the deal, with the £1.51bn takeover set to be signed in December. About £55m of the sale price will be contingent on the number of passengers using the airport.

Michael McGhee, a GIP partner, said that people using the UK's second busiest airport could expect improvements. "We will upgrade and modernise Gatwick airport to transform the experience for both business and leisure passengers.

"We plan to work closely with the airlines to improve performance, as we have done successfully at London City." Mr McGhee said the deal would be funded with a mixture of debt and equity, but debt would make up no more than 50 per cent of the purchase price. Earlier this week, GIP secured a £1.125bn loan from a group of 12 banks, which Mr McGhee says will partly be used to pay for the airport, and partly for capital expenditure at Gatwick.

"We have no exit plans at this stage," he added. "When we do come to sell Gatwick it is likely to be through selling it to another infrastructure fund, or possibly via a public listing."

BAA, which has a huge £9.6bn pile stemming from its 2006 takeover by the Spanish infrastructure group Ferrovial, will use the proceeds to pay down a £1bn bank facility that matures next year. A spokesman stressed that BAA was not forced to sell Gatwick.

However, industry experts said that £1.51bn was a long way short of what BAA had initially wanted for Gatwick.

"BAA said that it was looking for about £2.5bn when it first entered into negotiations about Gatwick, but almost everyone in the industry agreed that was vastly overpriced," said Chris Yates, an aviation analyst. "The price agreed today is about the most the market would take. There is an awful lot of work that GIP now needs to do to bring Gatwick up to world-class standards." GIP declared itself happy with the price.

There were also calls yesterday from union representatives at Unite for immediate talks over jobs at the airport.

BAA was ordered by the Competition Commission to sell Gatwick, as well as Stansted and either Glasgow or Edinburgh airports, in March. The group's three-day appeal against the decision ended yesterday, with a ruling expected early next year.

BAA argues that the original order was "riven" with apparent bias, with a member of the inquiry panel also apparently advising a potential bidder for Gatwick. The group also claims the two-year deadline imposed on BAA to sell the airports is unfair as the recession will dampen any purchase price.

Start your day with The Independent, sign up for daily news emails
ebookA unique anthology of reporting and analysis of a crucial period of history
peopleMathematician John Nash inspired the film Beautiful Mind
Richard Blair is concerned the trenches are falling into disrepair
newsGeorge Orwell's son wants to save war site that inspired book
Life and Style
Audrey Hepburn with Hubert De Givenchy, whose well-cut black tuxedo is a 'timeless look'
fashionIt may be a paradox, but the industry loves it
Arts and Entertainment
The pair in their heyday in 1967
Life and Style
fashionFrom bathing dresses in the twenties to modern bikinis
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine