"British Airport Group BAA Could Break Up"

Monday, August 20, 2007

British Airport Group BAA Could Break Up
By Vidya Ram
Forbes

 
LONDON - It was only a matter of time after Britain's Competition Commission
said it might force BAA to sell one of the country's coveted airports that
the declarations of interest started to flood in. 

Just a week after the Australian investment bank Macquarie said it had
approached BAA about buying one of its airports, German airport operator
Fraport has said that it would consider making a bid, depending on the
price. Fraport's Chief Executive Wilhelm Bender confirmed that it was
interested in acquiring one of the airports. 

"We will certainly look into it and manifest our interest should matters
become more concrete," Bender said. 

It will also depend on what is up for sale. If forced to part with one of
its airports BAA will most likely chose Gatwick, which has received the
smallest investment of all BAA's airports in the southeast of England. 

BAA, which was bought last year by Spain's Grupo Ferrovial, operates seven
British airports, including Heathrow, Gatwick and Stansted. The country's
competition commission launched an investigation into its dominance of the
market earlier this year, after receiving a reference from the Office of
Fair Trading. It is concerned that BAA's position could affect the quality
of services offered and earlier this month issued an interim statement that
outlined some of the options it was exploring. 

"We are looking at how common ownership could affect BAA's incentives both
to invest in and develop its airports, and operate them," said Christopher
Clarke, deputy chairman of the Competition Commission. Some of the
commission's concerns include delays to passengers going through security or
immigration, the quality of facilities, such as escalators, and
overcrowding. 

Robert Crimes, an analyst at JPMorgan & Chase, said there was less than a
50.0% chance that BAA would be broken up. 

This is unlikely to quell rumors about interest in the airports, some of the
busiest in Europe, that until now have been off limits to bidders, and would
be an attractive investment both for banks such as Macquarie, and operators
such as Fraport. As the Australian bank is flush with over 2 billion
Australian dollars ($1.6 billion) in cash, it is the most likely victor in a
bidding war. Macquarie, in partnership with Blackstone, was interested in
BAA when it went on sale last year, but lost out to Ferrovial. 

Shares in Fraport shot up by 2.04 euros ($2.75), or 4.5%, to 47.60 euros
($64.17) in Frankfurt on Monday afternoon, while Grupo Ferrovial, was
trading up 1.40 euros ($1.89), or 2.4%, at 60.00 euros ($80.89) in Madrid.
Macquarie closed up 1.25 Australian dollars ($1.00), or 1.8%, at 69.50
Australian dollars ($55.85) in Sydney.

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