More on BAA
BAA: takeover bid update
Talk of a takeover of airport operator BAA continues, the latest being a bid from a consortium lead by the Goldman Sachs Infrastructure Group.
BAA confirmed that Goldman Sachs had approached the company with a cash offer of 870p per share. BAA said the proposal also included a (conditional) partial share alternative in the bid vehicle to be issued in certain circumstances.
BAA has rejected the offer because “it clearly fails to reflect the true value of the Company.” The company previously rejected a bid of 810p per share from the Spanish construction group Grupo Ferrovial SA, last month.
BAA went on to state that it had received no further communication from the Consortium. Goldman Sachs released a statement to say that the consortium was reviewing its options, but did not rule out a fresh offer.
The rejection of the latest bid prompted some large institutional shareholders to raise the same question we did in our last piece :BAA’s management needs to show how returns and profits are going to increase. Current earnings estimates do not seem to justify BAA’s current share price of 877p which puts it on a prospective PE (2007 earnings) of 20x.
BAA has been a slow and steady performer, with the share price languishing at around 600p for much of the last twelve months. The recent increase in share price has been entirely due to speculation of a takeover but the rejection of the latest bid does not seem to be the end of the battle and may provide further short-term upside for daring investors.
Press speculation suggests that the American giant GE is expected to make an approach shortly. A price of 900p per share has been talked of before (at the time of Ferrovial’s bid at 810p) and the latest offer is close to this. Meanwhile the previous bidder Ferovial has until May 7th to submit its formal (hostile) offer to BAA shareholders.
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