ATW Daily News

BAA rejects Grupo Ferrovial takeover bid

Monday March 20, 2006

BAA said Friday that it had rejected a "pre-conditional" 810-pence-per-share, all-cash buyout offer from Spain's Grupo Ferrovial and its consortium partners. BAA shares closed at 839 pence Thursday.

Ferrovial's offer valued BAA, which operates London Heathrow, Gatwick and Stansted airports, among others, at £8.8 billion ($15.39 billion.).

In a statement, the airports operator said it had "no hesitation in rejecting this proposal, which does not begin to reflect the true value of BAA's unique portfolio of airport assets." It acknowledged Ferrovial's indication that it would be willing to increase its offer by "a small increment" in return for BAA's agreeing to grant limited due diligence access and recommending the offer, yet it said it did "not believe it is in shareholders' interests for it to enter into discussions with Ferrovial."

Grupo Ferrovial, a construction and services conglomerate whose portfolio of companies includes Swissport, announced its intentions last month (ATWOnline, Feb. 9). It said in a Friday statement that it "believes the proposal offers attractive value for BAA shareholders and hence is disappointed that BAA has chosen to reject [it] without further discussion."

Earlier last week, KLM Chief Executive and Air France-KLM Vice Chairman Leo van Wijk warned of the risks posed by a highly leveraged takeover of BAA. "If you leverage infrastructure that has very long-term returns with a high level of debt, the ability of the company to invest in runways and terminals will diminish, and that can be a constraint on the creation of the infrastructure that we need in Europe," he said at a lunch meeting of the Aviation Club of the UK, as reported by The Financial Times. "If raiders get control of these cash flows, they can kill airlines too, and that is not in the interests of the industry."

FT also said the Ferrovial-led consortium included the Singapore government's GIC Special Investments Fund and Caisse de Depot et Placement du Quebec, a Canadian fund manager.

by Cathy Buyck

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