Airports group agrees takeover

AIRPORTS group BAA yesterday abandoned its three-month battle against takeover by agreeing a deal with a Spanish-led consortium valuing the company at more than £10billion.

AIRPORTS group BAA yesterday abandoned its three-month battle against takeover by agreeing a deal with a Spanish-led consortium valuing the company at more than £10billion.

BAA, the owner of seven UK airports including Heathrow, Gatwick and Stansted, backed the bid from a consortium led by infrastructure group Ferrovial despite a higher offer fronted by the United States bank Goldman Sachs.

News of the deal was welcomed by critics of BAA, including the boss of low cost airline Ryanair and opponents of the airport group's plans for expansion at Stansted.

However, Ferrovial said it had no plans to break up BAA's UK estate and said it was committed to the group's existing capital expenditure programme.

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Having resisted all overtures since February, BAA finally gave ground late on Monday evening following a last minute “auction” between the two interested consortia ahead of a midnight deadline for Ferrovial to table its final offer.

The successful approach came in at 935p a share, equivalent to £10.11 billion, but also included a pledge to include a final BAA dividend payment, which Ferrovial's previous offers had planned to cancel.

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This took the overall value of the offer to 950.25p or £10.3 billion, only just short of the £10.4billion which BAA claimed it was worth in its defence against the earlier bids.

The Goldman Sachs-led consortium - which claimed yesterday that it had tabled an offer worth a total of 955.25p, also including the final dividend - said it was reviewing its position and urged BAA shareholders to take no action on the Ferrovial offer in the meantime.

Ferrovial said its bid vehicle, Airport Development and Investment (ADI), aimed to make BAA more efficient, by lowering overheads, outsourcing some operations and improving of procurement practices.

It said yesterday: “ADI believes this would introduce both a higher degree of flexibility in the operations and best industry practices, resulting in higher service levels overall.”

ADI had the financing available to undertake the expansion programme of BAA in the UK, including the use of a £2 billion facility capable of being drawn for a five-year period, Ferrovial added.

Other backs of the Ferrovial consortium include a Canadian fund manager and the private equity investment arm of the Singapore government.

Ferrovial's presence in the UK already includes infrastructure services firm Amey, Belfast City Airport and a 50% stake in Bristol Airport. It also owns 20.9% of Sydney Airport in Australia.

BAA, which besides Heathrow, Gatwick and Stansted also owns Southampton, Glasgow, Aberdeen and Edinburgh airports, handles 63% of all air passenger journeys starting and ending in the UK, including 92% in the London area.

The agreement with Ferrovial comes at a time of uncertainty for BAA with the Office of Fair Trading currently looking at whether to sanction a full Competition Commission investigation into the sector, which could lead to a break-up of the group.

In addition, the Civil Aviation Authority (CAA) is considering what charges can be made for Heathrow, Gatwick and Stansted airports for the period 2008-13.

The CAA has indicated that any party taking over from BAA will be expected to carry on with existing investment plans, which involve expansion at both Heathrow and Stansted.

It has also warned that it will fix charges “in accordance with its statutory duties and not in order to accommodate any particular financing arrangements adopted” - a clear reference to the increased debt likely to result from the takeover of BAA.

Michael O'Leary, chief executive at low-cost carrier Ryanair, the largest operator at Stansted, is among those to back a break-up of BAA, and has criticised the group's decision to return £1 billion to shareholders while insisting it could not afford to build a second runway at Stansted without increasing charges for passengers.

Speaking on BBC Radio 4's Today programme, he welcomed news of the takeover, adding: “We would hope it would lead to more efficient investment and the building of facilities at terminals that airline passengers actually want, rather than the gold-plated Taj Mahal palaces that the BAA have been building at excessive cost, overcharging passengers and airlines.”

Ferrovial indicated yesterday that it was considering an alternative plan for the expansion of Stansted but did not provide further details.

Stop Stansted Expansion campaign director Carol Barbone, said yesterday: “The takeover of BAA, coupled with a Competition Commission inquiry, should lead to a re-think of the expansion plans for Stansted - plans that are politically inspired, lack commercial logic and would amount to an environmental catastrophe for the entire local area.”

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