"Watchdog May Probe British Airports Market"

Thursday, May 25, 2006

Watchdog May Probe British Airports Market 
By JANE WARDELL
The Associated Press 


LONDON - Britain's competition watchdog said Thursday it is considering a
detailed inquiry into the domestic airport market even as Grupo Ferrovial SA
is making a hostile takeover bid for the airport operator BAA PLC.

The government's Office of Fair Trading said it was looking at whether the
current market structure, and BAA's dominance, delivers the best value for
air travelers.

BAA currently owns and operates airports that handle 63 percent of travelers
to and from Britain, a figure that rises to 86 percent in Scotland and to 92
percent in London, where it controls Heathrow, Stansted and Gatwick
airports.

"Competition in air transport is an extremely important part of the U.K.
economy, with a significant impact on U.K. consumers and business alike,"
said OFT Chief Executive John Fingleton.

"For these and other reasons, we have decided to look more closely at how
the airport markets work with the aim of establishing whether the current
market structure delivers best value for air travelers," he added.

The review, which the OFT said was part of its ongoing role to keep an eye
on key markets, comes as BAA attempts to fend off an 8.75 billion pound
($15.6 billion) takeover approach from Ferrovial.

The OFT said it was revealing to the market that it was considering the
broader inquiry because of the current interest in BAA.

"This creates a huge amount of uncertainty," said Oriel analyst Gerald Khoo,
adding that the situation might dissuade other bidders for the company.

Panmure Gordon analyst Andy Murphy said that the OFT's announcement equated
to a "robust defense" against the Ferrovial bid.

BAA Chief Executive Mike Clasper said the OFT's announcement came as a
complete shock and he could not see the logic behind it.

Clasper declined to comment on whether the OFT's interest would alter the
bid situation surrounding BAA, but he said it would have no impact on BAA's
confidence in its defense or the "economic fundamentals that underlie our
business."

"We couldn't be more regulated in London than we are," he added, as the
company released its official defense document against the Ferrovial bid.

Clasper said the company would tell the OFT it believes the London airports
are over-regulated.

Unveiling the formal response document, Clasper reiterated that he believes
BAA's intrinsic value is higher than 940 pence per share ($17.58), well
above the Ferrovial-led consortium's bid of 810 pence ($15.15) a share. The
consortium also includes Canadian investment fund Caisse de Depot et
Placement du Quebec and Singapore government fund GIC.

BAA shares fell 6 percent to 783 pence ($14.65) on the London Stock
Exchange.

If the OFT decides a full investigation is warranted, it will transfer the
probe to the Competition Commission.

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