Spanish victorious in BAA battle

Blair backs Ferrovial takeover. Fresh dawn raid thwarts Goldman's. Board clear-out likely
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The Independent Online

The battle for control of the airports operator BAA ended in victory for Ferrovial yesterday after Goldman Sachs pulled out of the bidding, leaving the field clear for the Spanish construction giant to complete its £10.3bn takeover.

On another day of high drama, Ferrovial clinched victory after its broker Citigroup launched a fresh dawn raid, lifting the Spanish stake in BAA to just under 29 per cent. Goldman's, which was preparing to raise its 955.25p offer by as much as 20p, tried to frustrate Ferrovial's share buying operation by announcing that it was still in talks with BAA and urging shareholders to take no action. But the attempt failed.

Tony Blair welcomed the Spanish takeover of BAA, saying that shareholders were better placed than ministers to judge who should be managing companies. He said foreign takeovers of airports, utility companies and other strategic companies were good for the consumer.

The Prime Minister told a Downing Street press conference: "You can argue forever about whether it was right or wrong to privatise various companies, but if they are in the private sector the best thing for the consumer is the best possible management.

"I think all the evidence is, if government starts interfering in this process, and trying to pour politics over it, you don't succeed for the consumer."

His remarks contrasted with an earlier warning from the Chancellor, Gordon Brown, that the proposed takeover of British Gas - now known as Centrica - by Gazprom could raise "political" issues. Earlier this year, Gazprom cut off supplies to the Ukraine, in what many saw as a political move provoked by differences between the Kremlin and the Ukrainian government.

The Ferrovial takeover of the owner of Heathrow, Gatwick and Stansted is likely to be followed by a clear-out of the BAA boardroom and widespread job cuts elsewhere in the company. The new Spanish owner is also drawing up plans for a cut-price scheme to build a second runway at Stansted to appease airlines at the Essex airport which are opposed to BAA's plan to spend £2.7bn.

Ferrovial is expected to sell off some of BAA's overseas assets to reduce the company's indebtedness, which will rise to £12bn once the takeover is complete. It will also hold talks with the Government and the airports regulator, the Civil Aviation Authority, to reassure them that BAA's very high levels of borrowing will not affect its investment programme. The company, which owns seven UK airports, is planning £9.5bn of expenditure over the next 10 years.

The takeover is the latest in a string of acquisitions of UK companies by Spanish predators, including Telefonica's purchase of O2 and the sale of Abbey to Banco Santander. It is also the second takeover of a UK airports group by Spain after the purchase of TBI, the owner of Luton airport, by Abertis last year.

The dramatic day began just after 7am when Ferrovial, having obtained clearance from regulatory authorities in Australia to lift its stake in BAA above 15 per cent, instructed Citigroup to go back into the market. Half an hour later, Goldman's urged shareholders to take no action, saying it was still in talks with BAA, but 20 minutes after that BAA itself issued a statement saying those talks had ceased.

Within the space of an hour, Citigroup had snapped up 140 million shares at 935p, representing a further 12.9 per cent of BAA, taking Ferrovial's stake to 28.7 per cent. Had Goldman's proceeded with a higher offer for BAA, it would have needed to secure the backing of 75 per cent of shareholders to finance the takeover. Just before 1pm, Goldman's formally acknowledged it had withdrawn from the contest.

Ferrovial has until 26 June to complete the takeover, although with a board recommendation and nearly 30 per cent of the company in its back pocket, this is expected to be a formality.

Mike Clasper, BAA's chief executive, is likely to leave the company after Ferrovial's takeover and is in line for a pay-off worth £3m in addition to the £3.6m pension pot he has built up. There are also questions over whether the finance director Margaret Ewing and the four other executive directors will remain with BAA.

Final hours of a tumultuous tussle

6.30am Ferrovial gets clearance to launch dawn raid

7.10am Citigroup goes into market, offering to buy 140 million shares at 935p

7.44am Goldman's claims it is still in talks with BAA and urges shareholders not to take any action. Citigroup still below critical 25 per cent level

8.05am BAA announces its talks with Goldman's have ceased. Laughter breaks out on Citigroup trading floor

8.15am Citigroup completes its share buying, having secured 12.9 per cent stake

12.24pm Ferrovial announces it now owns 28.7 per cent of BAA

12.52pm Goldman's confirms talks with BAA have ceased and it will not proceed with an offer.