Abigail Townsend: BAA flies high, but just wait till it touches down
The airport authority's assets look better on paper than on the ground
Sunday 04 June 2006
You have got to admire BAA, batting off multi-billion-pound approaches as if they were flies. Rejecting an 810p-a-share approach without a backward glance was one thing, but refusing even to discuss 900p, the massively improved offer from the consortium led by Spain's Ferrovial, took some gall. It values the business at £9.73bn but BAA's chief executive, Mike Clasper, was clear. "The number is higher but it's still not a number we're willing to accept," he told reporters last week.
In fact, by the end of the week, Ferrovial was looking rather embarrassingly as if it had run out of options after an apparent dawn raid on the stock seemed to have failed.
You certainly can't blame Mr Clasper for his approach. This is a company sitting on some extraordinary assets, and his tactics have let the market know that they won't be sold for anything other than top dollar. Ferrovial has until tomorrow, under Takeover Panel rules, to table a higher offer, while Goldman Sachs, which was rebuffed at 870p, has until Friday.
Yet while Mr Clasper may be the very embodiment of serenity, outside the mergers and acquisitions arena, a storm is brewing. The Office of Fair Trading is considering investigating the structure of UK airports, which can surely be only bad news for the owner of Heath-row, Gatwick and Stansted.
But more than that, while on paper BAA's assets look impressive, in reality it's a very different story. Were you building a new airport from scratch today, Heathrow would be the very model of what not to do.
The transport links are terrible, it does not have enough capacity and expanding it will be tough, as that expensive third runway is squeezed in between roads and housing. I would happily forgo the foreign holiday if it meant avoiding Heath-row. It's frankly just depressing: massive, confusing and unwelcoming - and that's before BAA's planned expansion.
It may limit where I can go on holiday, but give me City airport in London's Docklands any day: neat and tidy, convenient to get to and packed with smiling staff, not lost holidaying hoards.
Heathrow needs improving. As BAA has so far failed to do this, maybe Ferrovial, under the leadership of the equally serene Rafael del Pino, was the company to pull it off. Because Heathrow is important - the UK needs a major European hub. BAA's answer is a multi-billion-pound expansion of the airport. But as it's already such an unwieldy mess, I'm not convinced that simply enlarging it will deliver all the improvements BAA is hoping for.
If a deal is done - though that now looks increasingly unlikely - under the stewardship of Mr Clasper it can be guaranteed to be an excellent one for investors. But if a deal is not done, fighting off the Spanish could seem easy in comparison with the task ahead.
No cure for fat cats
I am thinking, rather belatedly, admittedly, of throwing my hat into the dot-com ring and setting up a website: eatlessandexercisemore.com. Because, let's be honest, in many cases of obesity, that's all the treatment most people need.
Not, however, that the drug companies appear to agree. They have poured millions into researching a new generation of slimming pills, seen as the next gold mine for the sector. It certainly makes good business sense. Obesity is a major problem, and one that must be dealt with. But there's a huge demand for quick cures and, rather conveniently, the biggest market for obesity drugs is the developed world, whose largely well-off population can pay for treatments - unlike many HIV and Aids sufferers in Africa. The pharmaceutical companies are also facing a crisis as generic competition soars and pipelines dry up.
So yes, obesity drugs make good business sense. What they are not going to do is help the drugs industry's already tarnished reputation.
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