Airport Operator and $19 Billion
the operator of some of the world's busiest airports, said today that it had accepted a new takeover offer from the Spanish construction group Ferrovial, ending a nearly four-month fight to remain independent.
Grupo Ferrovial's latest bid values BAA at about £10.2 billion, or $19 billion. "The board believes that an offer at this level represents an attractive price," BAA said in a statement.
Ferrovial's move appeared to frustrate a possible 11th-hour rival bid from the investment bank Goldman Sachs. During negotiations with BAA on Monday night, Goldman said it had proposed a nonbinding cash offer that would value BAA at £10.3 billion.
BAA acquiesced to Ferrovial's advances late Monday after a consortium led by the Spanish group succeeded in acquiring around 14 percent of BAA's shares on the open market.
The Ferrovial bid valued BAA at 950.24 pence a share, compared with Goldman's proposed offer of 955.25 pence.
A BAA spokesman said the company, which operates Heathrow, Gatwick and Stansted airports, had chosen the bid from Ferrovial over the one from Goldman because it offered the greatest certainty for shareholders in the near term.
"Under Ferrovial's offer, shareholders will get their money sooner," said Duncan Bonfield, a BAA spokesman. "Goldman's has made a proposal. But as long as it is just a proposal, then there are clear risks involved."
Ferrovial's bid, which includes a 15.25-pence-a-share dividend, has already received approval from European Union and British antitrust authorities. The offer from Goldman would likely need two to three months to complete due diligence procedures and secure regulatory approval, according to BAA.
BAA controls two-thirds of Britain's airports, and its dominant position has long been a source of concern for airlines, which complain that the company has the power to set arbitrarily high fees for landing rights and other airport services.
Last month, the British Office of Fair Trading said it was considering an investigation into whether the company has abused its market position to the detriment of consumers.
Robert Milton, chairman of the board of the International Air Transport Association, worried that airlines could be charged even more to use BAA's airports in the near term as the airport operator seeks to recoup its financing costs.
"It's hard to paint a happy picture at this time," Mr. Milton, who is also chief executive of Air Canada, said at an industry conference in Paris.
BAA's decision to accept Ferrovial's offer followed a series of overtures by the Spanish group that began in March, with a hostile takeover offer valued at 810 pence a share.
BAA's board swiftly rejected that approach, arguing that it significantly undervalued BAA's assets, which include airport stakes in Budapest and Naples, as well as restaurant and retail services concessions at several American airports, including Logan International in Boston. Ferrovial sweetened its bid to 900 pence last week, but BAA insisted that the company was worth at least 940 pence a share.
In a statement, Goldman Sachs urged BAA shareholders to take no action on Ferrovial's offer and said it would make a further announcement in the coming days. British market regulators have given the Goldman Sachs consortium until June 16 to make a firm offer for BAA, extending an earlier deadline by a week.
Mr. Bonfield, the BAA spokesman, said the company would not rule out negotiations with Goldman Sachs if it were to submit a formal bid. "We know our duty to shareholders," he said. "If there were an offer, then we definitely would have to look at it."
Ferrovial has until June 19 to revise its offer, while BAA shareholders have until June 26 to accept or reject the new Ferrovial bid.
BAA has said it plans to spend more than £9.5 billion over the next 10 years upgrading facilities at its three London airports. Major projects include a fifth terminal at Heathrow as well as modifications to runways and terminals to accommodate the new Airbus A380 "superjumbo" jet, which is scheduled to enter commercial service next year.
Given such large investments, combined with the added debt that BAA is expected to take on as a result of the Ferrovial deal, Standard & Poor's cut its credit ratings on the company to BBB+ from A and said it may cut them again.
BAA had £5.34 billion of debt on its books as of March 31, up from £3 billion at the end of 2005.
Grupo Ferrovial's latest bid values BAA at about £10.2 billion, or $19 billion. "The board believes that an offer at this level represents an attractive price," BAA said in a statement.
Ferrovial's move appeared to frustrate a possible 11th-hour rival bid from the investment bank Goldman Sachs. During negotiations with BAA on Monday night, Goldman said it had proposed a nonbinding cash offer that would value BAA at £10.3 billion.
BAA acquiesced to Ferrovial's advances late Monday after a consortium led by the Spanish group succeeded in acquiring around 14 percent of BAA's shares on the open market.
The Ferrovial bid valued BAA at 950.24 pence a share, compared with Goldman's proposed offer of 955.25 pence.
A BAA spokesman said the company, which operates Heathrow, Gatwick and Stansted airports, had chosen the bid from Ferrovial over the one from Goldman because it offered the greatest certainty for shareholders in the near term.
"Under Ferrovial's offer, shareholders will get their money sooner," said Duncan Bonfield, a BAA spokesman. "Goldman's has made a proposal. But as long as it is just a proposal, then there are clear risks involved."
Ferrovial's bid, which includes a 15.25-pence-a-share dividend, has already received approval from European Union and British antitrust authorities. The offer from Goldman would likely need two to three months to complete due diligence procedures and secure regulatory approval, according to BAA.
BAA controls two-thirds of Britain's airports, and its dominant position has long been a source of concern for airlines, which complain that the company has the power to set arbitrarily high fees for landing rights and other airport services.
Last month, the British Office of Fair Trading said it was considering an investigation into whether the company has abused its market position to the detriment of consumers.
Robert Milton, chairman of the board of the International Air Transport Association, worried that airlines could be charged even more to use BAA's airports in the near term as the airport operator seeks to recoup its financing costs.
"It's hard to paint a happy picture at this time," Mr. Milton, who is also chief executive of Air Canada, said at an industry conference in Paris.
BAA's decision to accept Ferrovial's offer followed a series of overtures by the Spanish group that began in March, with a hostile takeover offer valued at 810 pence a share.
BAA's board swiftly rejected that approach, arguing that it significantly undervalued BAA's assets, which include airport stakes in Budapest and Naples, as well as restaurant and retail services concessions at several American airports, including Logan International in Boston. Ferrovial sweetened its bid to 900 pence last week, but BAA insisted that the company was worth at least 940 pence a share.
In a statement, Goldman Sachs urged BAA shareholders to take no action on Ferrovial's offer and said it would make a further announcement in the coming days. British market regulators have given the Goldman Sachs consortium until June 16 to make a firm offer for BAA, extending an earlier deadline by a week.
Mr. Bonfield, the BAA spokesman, said the company would not rule out negotiations with Goldman Sachs if it were to submit a formal bid. "We know our duty to shareholders," he said. "If there were an offer, then we definitely would have to look at it."
Ferrovial has until June 19 to revise its offer, while BAA shareholders have until June 26 to accept or reject the new Ferrovial bid.
BAA has said it plans to spend more than £9.5 billion over the next 10 years upgrading facilities at its three London airports. Major projects include a fifth terminal at Heathrow as well as modifications to runways and terminals to accommodate the new Airbus A380 "superjumbo" jet, which is scheduled to enter commercial service next year.
Given such large investments, combined with the added debt that BAA is expected to take on as a result of the Ferrovial deal, Standard & Poor's cut its credit ratings on the company to BBB+ from A and said it may cut them again.
BAA had £5.34 billion of debt on its books as of March 31, up from £3 billion at the end of 2005.
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