Another airport for sale
According to the FT Irish financier Dermot Desmond will this week put London City Airport on the market.
The paper reports that US investment bank Morgan Stanley has been instructed to sound out potential buyers, after Desmond received a number of unsolicited approaches for the airport.
The move comes at a time when interest in UK airports is high, following last week’s acceptance by BAA of a takeover bid from a consortium led by Spanish construction group Ferrovial. The bid valued BAA’s equity at £10.11bn and gave it an enterprise value of £16.4bn or about 15-16 times earnings before interest, taxes, depreciation and amortisation. On that basis, the FT said, London City could attract an enterprise value of as much as £500m, in a probable auction before the end of September.
Morgan Stanley is expected to send out a teaser document this week, with prospective bidders likely to include both trade buyers and infrastructure funds.
The FT put forward German construction group Hochtief, which owns stakes in Sydney, Athens, Hamburg and Dusseldorf airports, and Frankfurt Airport operator Fraport as potential trade buyers. It also suggested Australian bank Macquarie, which advised Ferrovial on the BAA deal and already has a number of UK airport interests, and Spanish construction group Abertis, which beat Ferrovial to the acquisition of London Luton Airport in 2004.
Infrastructure fund interest is expected to come from Australian and Canadian pension fund managers, the paper added, which were involved in both the Ferrovial and Goldman Sachs consortia that bid for BAA, together with government private equity funds from Singapore and the Middle East.
Desmond acquired London City from construction group Mowlem for £23.5m in 1995. Since then, passenger traffic at the airport has jumped from 556k to 2m last year, while the number of aircraft movements has increased from 18,434 to 70,912.