No cash return in BAA defence

BAA will launch its formal defence against Grupo Ferrovial's takeover bid this week but shareholders will not be offered a cash return at the current bid level, sources familiar with the situation said yesterday.

BAA is likely to release the defence document against the Spanish firm's 8.75-billion-pound offer today, although it still has until tomorrow to make its move under UK takeover rules, one source said.

Ferrovial launched its 810 pence-per-share offer for BAA on April 7. It was rejected by BAA's board which also rejected a higher informal offer from US investment bank Goldman Sachs last month. BAA's defence document will again urge shareholders to reject Ferrovial's offer but is not expected to offer incentives such as a cash return or special dividend, the sources said.

Shares in BAA, which owns London's Heathrow, Gatwick and Stansted airports, were steady at 847 and a half pence at 12:35 p.m. yesterday.

Major BAA shareholders have made it clear they are holding out for a higher bid. Other sources familiar with the situation have said Ferrovial is biding its time with the 810 pence offer and it has not decided whether to raise its bid or walk away. BAA's defence document was expected to include details of its heavy capital investment plans for London airports and argue it is not wise for a heavily-indebted firm to take control of London's key airports.

It may also include revised passenger number forecasts, a source familiar with the situation said.

BAA's passenger growth has eased off record levels in recent years, when numbers were swelled by the expansion of low-cost airlines and a recovery in long-haul travel. It said in November higher retail income was helping offset slowing passenger growth and higher retail income.

Ferrovial has recruited Canadian Caisse de depot et placement du Quebec and Singapore's GIC Special Investments to its bidding team, while Australia's Macquarie Bank had agreed to become a joint financial adviser and possibly buy stakes in some BAA airports.

Another source familiar with the situation said it was unlikely Macquarie would offer an additional financial injection to help Ferrovial raise its offer, rejecting a report in The Observer.

The Spanish firm was still looking at offering up to 10 per cent of its share of the consortium to new investors, the source said.

Ferrovial may comment on the bid when it releases its first-quarter results today.