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6 June, 2006 - 08:32 By Staff Reporter

Door left open for new Goldman Sachs bid for BAA

A Goldman Sachs-led consortium has been handed the chance to stage a last ditch hijack of Ferrovial’s recommended £10.3bn offer for BAA – the owner of Stansted, Heathrow and Gatwick airports.A Goldman Sachs-led consortium has been handed the chance to stage a last ditch hijack of Ferrovial’s recommended £10.3bn offer for BAA – the owner of Stansted, Heathrow and Gatwick airports.

Ferrovial, a Spanish roads and infrastructure specialist, walked away from talks with BAA in the early hours of this morning having shaken hands on a deal – even though Goldman Sachs had tabled a higher bid in the private auction.

But the door has been left open to a renewal of bidding hostilities. The Takeover Panel has granted Goldman Sachs an extension until June 16 to make an even higher offer.

In such circumstances, if BAA felt it was able to recommend a further, sweetened Goldman Sachs offer to shareholders, that deal could still go ahead, but compensation running into many millions would have to be paid to the Spanish company.

Clearly that penalty would have to be brokered into any new bid from the Goldman Sachs consortium.

A BAA insider told Business Weekly: “This whole business is far from done and dusted.”

The initial riposte from the Goldman Sachs’ Infrastructure Group was to urge BAA shareholders to stay their hand and await further developments.

A statement read: “The consortium confirms that yesterday it submitted a fully financed proposal for BAA plc at an aggregate of 955.25p per share (including the declared final dividend of 15.25p). The consortium is continuing to review its position and a further announcement will be made in due course. The consortium urges shareholders to take no action.”

BAA’s official statement was equally to the point: “The board of BAA confirms that it has agreed, subject to final documentation, a revised definitive proposal from the Ferrovial Consortium valuing BAA at 950.25 pence per share.

“As part of this consideration, shareholders will be entitled to receive the proposed final dividend of 15.25 pence per share. The board believes that an offer at this level represents an attractive price for BAA. The board will make a further announcement shortly.”

Sources close to the bidding auction said that BAA considered the offer from Ferrovial the best commercial and cultural fit.

Business Weekly understands that a pledge from Ferrovial to continue multi-billion pound investment in BAA’s leading airports – Heathrow and Stansted – was key to that decision. That includes T5 at Heathrow and a second runway at Stansted.

The sources also claim that some BAA directors fear the group could be broken up by the Goldman Sachs consortium and that there are fundamental differences in the approach being adopted by the New York and London ends of that consortium.

Whoever wins BAA’s hand after the new June 16 deadline – appropriately falling at high noon – must then satisfy the UK’s competition tsars that their intentions towards the continued growth of BAA’s airport chain are strictly honourable.

Although the Office of Fair Trading has already signalled it would like to see an end to BAA’s monopoly of London airports, it would be satisfied with the proposed £2.5bn sell-off of Gatwick, with Heathrow and Stansted – the jewels in the BAA crown – remaining sacrosanct and earmarked for multi-billion pound growth.

Indeed, these two airports are integral to the UK government’s long-term airports expansion strategy.

Heathrow and Stansted are expected to command a large share of burgeoning air passenger traffic in Europe – forecast to double to 2 billion passengers by 2020.

As well as this long term visibility, investors are also drawn by the ancillary money-making opportunities from airline landing fees and airside businesses, principally leases for shops and restaurants.

• Stansted based low fares airline Ryanair meanwhile announced record post-tax profits of 302m Euros – some 7m Euros ahead of previous expectations. 

Traffic grew by 26 per cent to 35m passengers, yields were up 1 per cent as total revenues grew by 28 per cent to 1.69 billion Euros.

Despite substantially higher fuel costs, Ryanair achieved an 18 per cent post-tax margin, as adjusted net profits increased for the year by 12 per cent to 302m Euros.

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