The airport operator, BAA, confirmed yesterday it will hand back cash to shareholders if the hostile bid from Ferrovial of Spain fails, but disappointed the market by saying the amount involved would be only £750m.
The expectation had been that BAA, which owns seven UK airports, including Heathrow, would return as much as £1bn to shareholders and initial suggestions put the figure at £2bn.
BAA is thought to have been limited in its room for manoeuvre by its massive capital investment programme which requires it to maintain a strong balance sheet. Over the next 10 years it plans to invest £9.5bn.
BAA shares ended 13p, or 1.6 per cent, lower in a falling market at 823p. The Ferrovial consortium has offered 810p a share while Goldman Sachs has made an informal approach worth 870p. Both approaches have been rejected by the BAA board
The Ferrovial consortium is planning to take on £6.6bn of debt to fund its £8.8bn bid. In addition to BAA's existing borrowings of £5.5bn, this would leave the business having to service debts of more than £12bn.
Last week the airport regulator, the Civil Aviation Authority, warned bidders for BAA it would not bale them out if they ended up being overstretched because of their debt level. But the warning was also addressed at BAA in the event it opted for a very aggressive defence of its independence.Reuse content