3i Group Consortium Halts Gatwick Bid On Price - Sources

A consortium comprising 3i Group PLC's (III.LN) infrastructure business, Teachers' Pension Plan and Canada Pension Plan has stopped working on a bid for London's Gatwick airport, people familiar with the situation told Dow Jones Newswires.

Airport operator BAA Ltd., a unit of Spain's Grupo Ferrovial SA (FER.MC), launched the sale in September and hired Royal Bank of Scotland Group PLC (RBS.LN) and HSBC Holdings PLC (HBC) as advisers.

The 3i group hasn't disbanded and still views Gatwick as an attractive asset but thinks the GBP2 billion price tag is too high and has stopped actively working on a bid, people said. It will monitor the situation and hasn't formally withdrawn, they added.

Earlier this month, Ferrovial said it hoped to get binding bids by the end of March or sometime in April.

BAA, which also runs Heathrow and Stansted airports, is being forced to sell Gatwick by competition authorities, who have suggested that the operator sells three of its seven airports. Rather than lose Heathrow, the busiest of the seven, BAA has put Gatwick on the block. The U.K. Competition Commission is expected to issue a final decision at the end of this month.

Bidders still involved in the process include Gatwick Future Partnership, which comprises Deutsche Bank AG (DB) unit Rreef Alternative Investments, and Australia's Babcock & Brown (BCM.AU);Global Infrastructure Partners, which includes London City airport owners General Electric Co. (GE) and Credit Suisse Group (CS); and a consortium comprising a Citigroup (C) infrastructure fund, Vancouver Airport and John Hancock Life Insurance Co. bidding jointly as Lysander Gatwick Investment Group, people said.

However, it is uncertain whether all three will submit final bids - the process is difficult and the timetable is tight, the people added.

Meanwhile, several banks are in the frame as potential lenders for the staple finance being arranged by RBS and HSBC to be available to the winning bidder.

The staple finance has been estimated at GBP1.6 billion by people familiar with the matter, comprising GBP1.1 billion for the acquisition and a further GBP500 million for future investment.

In addition to the staple finance, Ferrovial may also offer a vendor loan to the potential buyer, one person has told Dow Jones Newswires.

-By Marietta Cauchi, Dow Jones Newswires; [phone]; [e-mail]

(Carol Dean contributed to this item.)