Spanish go hostile in £8.75bn pursuit of BAA

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The Independent Online

The Spanish infrastructure giant Ferrovial fired the starting gun yesterday in the bid battle for BAA by launching an unsolicited offer pitched at £8.75bn - the same price as its original non-binding approach which the UK airports group rejected three weeks ago.

BAA responded immediately, describing the 810p-a-share offer as "hostile" and saying it had been "emphatically rejected" for not beginning to reflect the true value of the company.

But Ferrovial, which has teamed up with Singaporean and Canadian partners to bid for the owner of Heathrow, Gatwick and Stansted, insisted its offer was "unilateral" rather than hostile and emphasised that it remained keen to obtain a recommendation from the BAA board.

The Spanish company said that the reason it had proceeded with a formal bid at a level already rejected by BAA and significantly below the market price of its shares was because there was insufficient time to agree a recommended offer ahead of the 24 April deadline set by the Takeover Panel for it to "put up or shut up". A source in the Ferrovial camp said: "This is not about price, but procedure."

But the BAA camp described Ferrovial's tactics as "arrogant" and questioned why, if it was so keen to secure a board recommendation, it had not made any attempt to contact BAA in the past three weeks.

The formal launch of the bid gives Ferrovial and its partners, the Canadian investment group Caisse de Depot et Placement du Quebec (CDP), and GIC, the private equity arm of the Singapore government, just under three months to seek to reach an agreement with BAA.

The consortium has 28 days in which to issue an offer document and a further 60 days after that to complete the takeover.

However, at 810p, the offer has no chance of success. BAA shares closed 12.5p higher last night at 847p - some 5 per cent above the bid price - and most analysts believe Ferrovial will have to pay at least 900p to stand any chance of success.

Ferrovial said that by making a formal offer, shareholders would be able to engage for the first time and examine the merits of the bid. But F&C Asset Management, which holds a 1.7 per cent stake in BAA, said: "At the moment the bid is below the share price so while we are looking at it, it wouldn't be of interest as things stand."

Ferrovial would not break down how much of the £8.75bn purchase price would be funded by debt and how much by equity. But it is understood that "several billions of pounds" of equity will be injected into the bid vehicle, Airport Development and Investment Limited, so that the debt element is limited to between 60 and 70 per cent. Ferrovial will provide 64 per cent of the equity element with CDP contributing 26 per cent and GIC the remaining 10 per cent. The Australian investment bank Macquarie is advising Ferrovial on the bid but is not part of the consortium. Under a side deal, however, Macquarie has agreed to acquire Ferrovial's interests in Sydney and Bristol airports if the BAA bid succeeds. Macquarie is already a shareholder in the two airports.

Rafael del Pinto, the chairman of Ferrovial, said: "Whilst this bid is being made unilaterally, we do not regard it as hostile. We remain ken to engage in a dialogue with the BAA board with a view to securing a recommendation of the consortium's offer."

But the chairman of BAA, Marcus Agius, dismissed the hostile approach of the Spaniards: "We have already made our position on this offer crystal clear."

The Ferrovial offer is conditional upon it being cleared by the European Commission and not referred to the UK Competition Commission by the Office of Fair Trading, but Ferrovial said it was confident there would not be any regulatory obstacles.