The Telegraph
Since 1st March, 1999
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Spanish fine, Indian not so
- Calm greets Heathrow takeover buzz, unlike Mittal bid

London, Feb. 10: Heathrow airport, one of the busiest in the world, may be bought by a Spanish consortium ' and this time, there are no howls of protest from European governments who have objected to Lakshmi Mittal’s proposed takeover of rival steel firm Arcelor.

While the takeover of one European company by another will be judged purely on its business merits, as will be the case where Heathrow and other British airports are concerned, it has been alleged that with Mittal, the governments of France, Spain and Luxembourg have allowed narrow nationalistic interests to influence their judgements ' because he is of Indian origin.

Yesterday, it was disclosed that the Spanish consortium, Grupo Ferrovial, was interested in buying the British Airports Authority, the privately owned group which runs Heathrow and a number of other UK airports.

Grupo Ferrovial already owns Belfast City airport and half of Bristol airport, but now apparently wishes to buy seven other UK airports, including the three major ones in the country, Heathrow, Gatwick and Stansted.

Of course, it’s early days, though the purchase price, according to the City of London, could exceed '8 billion. Since news of the bid leaked, BAA shares have surged in value by 20 per cent, rising by 27 pence to 779.5 pence yesterday.

BAA, which was privatised in 1987, is the latest national “trophy asset” to attract takeover moves, following foreign approaches for the London Stock Exchange and ports group P& last year. Even Rolls-Royce and Bentley, symbols of English excellence, are now German owned.

Analysts say that while any deal would be subject to standard regulatory procedures, there has yet to be a case under the 2002 Enterprise Act where a takeover has been referred in the public interest on national security grounds.

Three years ago the British government lost its controlling share in BAA after it was ruled illegal by the European Union ' the same EU will have to look at Mittal’s bid and have to be consistent. That stake in BAA allowed the British government the power to veto any bid that it thought was against the national interest.

Hilary Cook of Barclays Stockbrokers said the UK government was certain to take a close look at any takeover proposal, particularly as Heathrow and the other airports were seen as economically important assets.

She said: “Many of our utilities are under foreign ownership, but Heathrow is part of the national infrastructure and it’s important that planes can land there cheaply and efficiently. Any deal will be looked at closely, but on the other hand BAA is bidding to run other people’s airports so why can’t the reverse be true'”

She believed private equity firms were unlikely to get involved in the bidding because of BAA’s high capital expenditure requirements, including the building of Terminal 5 at Heathrow. Terminal 5 is being expanded to take the Airbus 380 superjumbos, which will be able to fit in anything between 500 and 800 passengers.

Ferrovial is one of Europe’s leading construction, services and infrastructure groups, with more than 68,000 employees and a presence in 40 countries. It has annual revenues of more than '4.8 billion.

The Spanish firm is yet to make a formal approach but said in a statement: “Ferrovial’s considerations are at a preliminary stage and there is no certainty that any offer will be made. No approach has yet been made to the board of BAA.”

Analysts at Goldman Sachs suggested BAA’s defence tactics could include auctioning off its Scottish airports ' Edinburgh, Glasgow and Aberdeen.

One said that Ferrovial would need tacit government approval: “We believe that if the UK government doesn’t like any proposed deal then it can find ways to block it. It could use legislation to change the way specific airports are regulated and would have enough flexibility to throw more than a spanner in the works.”

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