BAA, the airports operator facing a hostile bid from Spain's Ferrovial, is spending £2m a week defending itself against the unwelcome offer, it emerged yesterday.
The company disclosed that between 8 February, when Ferrovial first made public its interest in bidding, and 31 March, a total of £15m was spent on advice from investment banks, lawyers, accountants and public relations firms.
BAA said that the total cost of defending the bid was still uncertain but would be "significantly greater" than the £15m spent up to the beginning of April - a period which does not include either the actual launch of the Ferrovial bid or the issuing of BAA's first formal defence document.
Mike Clasper, BAA's chief executive, admitted it was a "disgustingly high number" but added: "We are very conscious of what this is costing and have been aggressive in negotiating the right terms, however, this is an expensive process. It is a lot of money but that is the going rate."
BAA's defence team, led by the investment banks UBS and Rothschilds are on an incentive fee arrangement which varies according to whether they repel Ferrovial or succeed in making it pay a substantially higher price than the £8.8bn so far offered.
Mr Clasper reiterated that the 810p-a-share bid "significantly undervalued" BAA but would not be drawn on how much he thought the company was worth. BAA has already rejected an informal approach worth 870p-a-share from a consortium led by Goldman Sachs.
BAA has until the bank holiday on 29 May to come up with its final defence against Ferrovial. It is expected to offer to return cash to shareholders but the amount will be limited by the need to retain a strong balance sheet to fund BAA's £9.5bn investment programme.
Mr Clasper was speaking as BAA announced an 8 per cent rise underlying profits to £710m last year despite passenger numbers at its seven UK airports only increasing by 2 per cent. Revenues rose by 7 per cent to £2.23bn but costs rose by a similar amount, after sharp increases in energy and rates bills, policing charges and staff wages.
BAA's results were complicated by the sale of part of its property portfolio, the £1.35bn acquisition of Budapest airport in December and adjustments to the valuation of derivatives. At the pre-tax level, profits fell 17 per cent to £757m.
But Mr Clasper said the underlying performance showed a strong improvement. Net retail income, which excludes cost of sales at BAA's duty free outlets, rose 5 per cent to £616m while landing charges increased 9.6 per cent to £898m. Within this figure, there were increases of 11 per cent, 16 per cent and 6.3 per cent respectively at Heathrow, Stansted and Gatwick, BAA's three regulated airports in the South-east.