BAA shares lifted by hopes of bid battle

Fresh developments in the BAA takeover saga today pushed the airport operator’s stock closer to the 900p a share targeted by the City as a likely takeover price.

BAA rose 16.5p to 858p as investors digested renewed bid activity over the weekend, including the news that BAA turned down a second takeover approach - this time from a consortium led by US investment bank Goldman Sachs.

BAA said the “highly conditional” proposal – made on March 30 – undervalued it, although at 870p a share the offer is still a significant premium on the 810p on the table from a group led by Spanish infrastructure company Ferrovial.

Goldman’s rejection was made public on Sunday and has been followed by speculation that insurer AIG is part of the consortium and that fellow US giant General Electric is also interested in participating.

That was enough to lift the UK company’s shares by 2% as market watchers suspected that Goldman’s failure to engage BAA in talks first time around may not represent the end of its interest.

Goldman said today it continued to review its options.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: “It may be a case of testing the water and it’s reasonable to speculate that Goldman will be back at a higher price. And what it has done is flush out GE as another potential bid party.”

Ferrovial was recently told by BAA that its offer “did not begin to reflect the value of BAA’s unique portfolio of airport assets”.

It has been widely reported that institutions are holding out for at least 900p a share – valuing the entire company at around £9.75bn (€14.1bn).

BAA’s UK estate is made up of Heathrow, Gatwick, Stansted, Southampton, Aberdeen, Glasgow and Edinburgh airports.

The company also has interests in the United States, Australia, Italy and Hungary, but Ferrovial has said it would focus investment in the UK and enhance capacity, in particular, in south-east England.

The Spanish consortium also includes a Canadian fund manager and the private equity investment arm of the Singapore government. It sparked takeover speculation in February when it shocked the market by revealing its intention to mount an offer for the FTSE 100 Index company.