BAA predators circling

Goldman Sachs is rumoured to be waiting to see shareholder reaction to Spanish construction company Ferrovial’s hostile £8.75bn (US$15.27bn) takeover battle for airports operator BAA before it decides whether to trump the existing bid launched on April 7.

The US investment bank recently raised an US$8bn infrastructure fund to buy air and seaport operators and its likely hunger for a deal is thought to have increased after it dropped its £5.37bn bid for UK commercial television company ITV last month. Sources close to the bank said it was trying to pull together a group of interested investors to take over BAA, although it would probably only take a minority stake in the company.

On Friday, Ferrovial pulled the trigger on its takeover attempt for BAA by offering 810p per share.

Advised by international banks Citigroup, Macquarie and HSBC, Ferrovial has pulled in a powerful group of investors, including Canadian pension fund Caisse de Dépôt et Placement du Québec (CDP) and Singapore state investment company GIC.

If its bid were successful, Ferrovial would take 64% of BAA, with the option to sell on 10% to other investors, such as the backing banks. CDP would own 26% and GIC 10%.

Debt funding for the bid is being arranged by Citigroup, Royal Bank of Scotland, BSCH, HSBC and Calyon. Macquarie’s listed airports fund has also negotiated a call option to acquire Ferrovial’s 20.9% interest in Sydney Airport for A$1bn (£421m/US$600m) and its 50% interest in Bristol Airport for £106m (US$154m), and a put option for Ferrovial to sell its stakes in Bristol and Sydney airports, which is worth 7.5% less than the purchase option.

BAA “emphatically rejected” the deal “as not beginning to reflect the true value of BAA’s unique portfolio of strategic airport assets”.

The company, which is now likely to offer a large share buyback as part of its defence, operates seven UK airports, including Heathrow and Gatwick, that carry 133.2m passengers, and others in the US, Australia, Hungary and Italy.

BAA’s annual sales were £2.115bn in its last financial year, up from £1.97bn in the 12 months to end-March 2004. Operating profits in the 2004/05 financial year were £688m, up from £616m in 2003/04.

People close to the battle said it was clear that 810p per share would not be enough, and reckoned on more than 900p, depending on the robustness of the defence document. But one said that by putting in the firm offer Ferrovial had shown it was serious and able to get financing from a host of banks, even without board support and agreement from the pension scheme trustees. Ferrovial hopes talks with BAA’s board and trustees of the £1.7bn pension fund can now take place.