BAA rejects £9.4bn Goldman offer

BAA, which runs Britain's biggest airports including Heathrow, Gatwick and Stansted, stressed that the offer had been "preliminary" and "highly conditional". The conditions set included final approval for a deal from the relevant investment committees of the individual members of the consortium, due diligence by the consortium, its advisers and financiers and a recommendation from BAA's board.

The news of Goldman's bid kicks Ferrovial's 810p-a-share offer for the company into touch. The Spanish group's proposal was also rejected this month by the airports operator.

Analysts believe that any attempt to buy BAA will have to be pitched at more than 900p if it is to be successful. Most calculate that the company's assets are worth about 780p, although research by JP Morgan suggested this figure should be closer to 830p, excluding the customary 25 per cent bid premium traditionally seen in takeover situations.

BAA shares closed at 841.5p on Thursday, the last day of trade before the Easter holidays.

Ferrovial plans to push on with its offer. It is expected to trigger the beginning of the formal timetable under Takeover Panel rules when it posts its offer document to BAA shareholders in the next three weeks.

Presently, it has two partners - Caisse de Dépôt et Placement du Québec, a Canadian pension fund, and GIC, an investment arm of the Singaporean government. It is being advised by Australia's Macquarie Bank, to which it will sell stakes in the Sydney and Bristol airports if the bid goes through.

The Civil Aviation Authority, Britain's aviation regulator, recently warned that anyone wanting to buy BAA should plan for the major upgrades to airport facilities expected from the company in the coming years. The group is due to spend £2.2bn on a second runway at Stansted and has earmarked £1.5bn for a fifth Terminal at Heathrow. The latter will open in March 2008.

Goldman Sachs' offer is believed to have been spearheaded by Bill Young who runs its infrastructure investment fund. The knock back from BAA is the fourth the US investment bank has suffered in the past three weeks from a major UK-listed company. Last week, a buyout offer for the All Bar One owner Mitchells & Butlers was blown apart after Goldman, which was acting as its financial advisor and funding provider, decided to abandon the consortium.

Similarly, at the start of the month, ITV's board brushed aside a move on the broadcaster by a Goldman consortium featuring Greg Dyke, the former director general of the BBC. At the end of March, Associated British Ports rebuffed a £2.3bn offer from the bank which had teamed up with Canada's Borealis and Singapore's GIC.

Goldman is said to be wary of being involved in hostile takeover battles. In fact, Hank Paulson, the investment bank's chairman and chief executive, was reported to have vetoed the bank's ongoing involvement in the move on Mitchells & Butlers once it was rejected by the board of the pubs operator.

Goldman is not the only financial player to have had takeover offers knocked back. In the retail sector, Kesa Electricals, House of Fraser and HMV rejected private-equity offers this year, as institutional investors have come to realise that financial buyers do not generally bring much to the party that the companies themselves cannot do.

This trend will only add to the pressure on financial firms struggling to find a home for the billions of pounds they have raised from pension funds for buyouts. Goldman's infrastructure fund, which has targeted BAA and AB Ports, is yet to complete its first major deal.