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4 June, 2006 - 12:41 By Staff Reporter

BAA will sell Gatwick to keep Stansted

Airport owner BAA would be prepared to sell Gatwick Airport so it could keep its prized assets of Stansted and Heathrow in any break-up ordered by competition tsars, Business Weekly understands.

Multi-billion pound investment has already been committed to the long-term development of both Stansted and Heathrow but Gatwick has reportedly been earmarked as a potential makeweight if the Competition Commission is called in to oversee an end to a perceived BAA monopoly of London’s airports.

While some industry analysts have been predicting that Stansted would have to go in any break-up, management is taking a different view.

The reasons Stansted is the most sought-after of the three BAA London airports are exactly what make it most attractive to keep and nurture – providing massive long-term benefits for the owner.

Gatwick, on the other hand, is under the twin clouds of legal restrictions and lack of real growth prospects so there are limits to the progress BAA could achieve there.

Gatwick as a stand-alone purchase would still make an attractive option for potential buyers without forcing BAA to part with the ‘Crown Jewels’ – Stansted and Heathrow. Expect a price tag of around £2.5bn to be placed on a Gatwick sale.

BAA may even consider the Gatwick sell-off option even before the Office of Fair Trading makes any official recommendations to the Competition Commission, we understand.

OFT felt obliged to reveal that it was looking at BAA’s so-called London monopoly to be fair to both BAA and the international consortia involved in hostile takeover bids.

Both the Ferrovial and Goldman Sachs-led groups are thought to be considering fresh offers for BAA.

The stakes were raised when rejected a hugely sweetened offer from Spanish group Ferrovial of 900p a share – valuing the UK business at £9.73bn. Although the offer was 11 per cent higher than the original bid, BAA smashed the hostile move out of court.

It is believed that BAA has also rejected an approach from US bank Goldman Sachs. But the bidding won’t stop there.

Ferrovial and Goldman Sachs are believed to be gathering even larger war chests to make an offer BAA can’t refuse at well over £10 bn.

Both the hostile bidding consortia are making sure their intentions are made known to BAA shareholders, caught in the middle like a card player with a stutter, not knowing whether to stick, twist or fold.

BAA’s own defence strategy includes a pledge to return £750m to investors if a hostile takeover bid fails so there is hardly any need for stockholders to do much more than sit back and wait and see what unfolds. They are certainly not going to lose out.

Heathrow, Stansted and Gatwick together handle 90 per cent of passengers in the London area and 63 per cent nationally.

The UK government is backing a second runway at Stansted amid growing clamour against the further growth of Heathrow, buoyed by BAA’s commitment to invest £9.5bn in upgrading its airports over the next 10 years as well as focusing on the growth potential of its assets.

The Government is keen to see BAA stay in British hands, otherwise its entire long-term aviation strategy for the UK could be blitzed.


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