Some of the UK's biggest airports look poised for Spanish ownership after a dramatic bid battle yesterday drove the value of BAA above £10 billion.
The airports operator, which owns seven UK airports including Heathrow, Gatwick and Glasgow, backed a bid from a consortium headed by infrastructure company Ferrovial, despite a higher offer fronted by US bank Goldman Sachs.
Ferrovial said it had no plans to break up the UK estate and said it was committed to the existing capital expenditure programme of BAA.
British Airways chief executive Willie Walsh said he was still optimistic about the expansion of Heathrow.
"I am encouraged by some of the comments I have heard regarding the future of Heathrow. I see signficant potential for Heathrow to develop and I expect that Grupo Ferrovial will be fully focused on Heathrow," he added.
BAA resisted the approaches of Ferrovial for more than three months, but yesterday admitted its own valuation had been reached after a late-night auction took place ahead of a deadline for Ferrovial to table its final offer.
The successful approach came in at 935p a share - equivalent to £10.11 billion - but included a pledge to include a final BAA dividend payment, taking the overall value of the offer to 950.25p, or £10.3 billion.
The Goldman Sachs-led consortium, which made an offer worth a total of 955.25p, said it was reviewing its position and urged BAA shareholders to take no action on the Ferrovial offer in the meantime.
Ferrovial, which has more than 78,000 employees and a presence in 40 countries, already owns 50 per cent of Bristol Airport, all of Belfast City Airport and 20.9 per cent of Sydney Airport.
It will add a company which handles 63 per cent of all air passenger journeys starting and ending in the UK, including 92 per cent in the London area, where BAA operates Heathrow, Stansted and Gatwick, and 86 per cent in Scotland through Glasgow, Aberdeen and Edinburgh. BAA also owns Southampton airport and a clutch of overseas interests.
While Goldman Sachs' offer was slightly higher, Ferrovial swayed BAA's board because its bid was more advanced, sources and analysts said. Goldman Sachs' bid would take two months to complete, creating uncertainty for BAA investors.
Another source said there had also been concern Goldman Sachs would break up the company's airports, while Ferrovial had already reached agreement with BAA's pension trustees on its strategy for the group.
"We're very, very close to the end game," said Grahame Exton, fund manager at Tilney Investment Management, which holds BAA shares.
"It sounds like Goldman's had various conditions applied to their offer. They would have to loosen both the restrictions and increase their offer to get BAA management to look at it." Ferrovial said it had also bought 150 million shares, or 13.9 per cent, of BAA stock. Dealers said the stake would make it more difficult for rival bidders to come in.
"We are committed to cooperating with current management and providing on-going investment in infrastructure with the ultimate aim of achieving value-enhanced quality services for our stakeholders and customers," Ferrovial chairman Rafael del Pino said.
The UK Takeover Panel said Goldman Sachs had until June 16 to make a revised offer for BAA, extending an earlier bid timetable by a week.
Ferrovial cannot make a revised offer after June 12 and its offer goes unconditional on June 26 under the new bid timetable.
Ferrovial also offered a share alternative which would allow some shareholders and bondholders to hold onto a stake in BAA for the longer term.
Ferrovial has recruited Australia's Macquarie Bank to its bidding team, along with Canadian Caisse de depot et placement du Quebec and Singapore's GIC Special Investments.
The Goldman Sachs consortium included US insurer AIG, Canadian investment fund Borealis, Commonwealth Bank of Australia's Colonial First State, Mubadala and Ontario Teachers Pension Fund.
Shares closed up 20p at 948.