Ferrovial set to sell BAA stake
By Mark Mulligan in Madrid
Published: October 22 2010 10:29 | Last updated: October 22 2010 14:38
Ferrovial is preparing the sale of a 10 per cent stake in UK airports operator BAA, part of wider asset disposal programme aimed at paying down debt at the highly leveraged Spanish infrastructure group.
The Madrid-based company, which led a consortium in the €16bn ($22bn) purchase of BAA at the height of the credit boom in 2006, said on Friday it had “started a process for a possible sale of a minority stake in BAA”.
It added: “Initially, the proposed transaction is to divest 10 per cent of the equity in FGP Topco, parent company of BAA.”
Ferrovial, which also has toll roads, municipal services operations and construction businesses, holds just under 56 per cent of BAA. The proposed sale would cut its holding to 46 per cent, allowing the company to remove €15bn in BAA debt from its balance sheet, but also reducing sharply the profits it could book from the business in its own accounts. The rest of BAA’s equity is held by Canadian institutions and GIC, the Singaporean wealth fund.
The sale is likely to draw a strong field of possible bidders, particularly specialist infrastructure funds, private equity groups and sovereign wealth funds. Many sector specialists say the gradual return of financiers to the market, coupled with relatively cheap valuations, has created ideal conditions for buyers.
Citi estimated the implied equity value of a 10 per cent BAA stake at about £1.5bn.
Ferrovial has been under extreme financial pressure since the BAA deal, which closed just as a security services foiled a terrorist plot against transatlantic flights, resulting in an costly security crackdown at airports.
BAA said Friday there were no plans to change day-to-day management, nor its strategies or priorities, in the event of a sell-down of Ferrovial’s stake.
However the proposed sale is likely to raise questions about Ferrovial’s long term commitment to BAA, especially given the trouble it has faced with UK competition authorities.
The regulator last year forced to sell Gatwick airport at a heavy loss. BAA has also been told to sell one of the two Scottish airports that it controls as well as Stansted airport.
The global financial crisis has also hit Ferrovial and BAA hard, forcing them to postpone a complex financial restructuring and driving up the costs of new debt. A deep recession in Spain has also hurt the company, cutting revenues in the domestic construction and toll road businesses.
However, the company says its order book in other markets is healthy, while airlines were seeing a rebound in passenger volumes and road traffic volumes have also improved this year after a dismal 2008 and 2009.
Ferrovial has sold assets from across the group in an effort to shore up its strained balance sheet. It recently sold 10 per cent of a prized motorway asset in Canada for €640m.
Last year it merged with Cintra, its separately listed toll road business, in an operation aimed partly at freeing up cash which also diluted the Del Pino family’s stake to below 50 per cent for the first time in the company’s 60-year history.
Ferrovial said on Friday that the sale was aimed at establishing a market value for the UK airports business. “We have taken the decision to go to the market to sell a minority stake of BAA’s capital, though the completion of any sale will depend on the offers received,” said Iñigo Meirás, the chief executive.
additional reporting by Pilita Clark in London
Copyright The Financial Times Limited 2010.
By Mark Mulligan in Madrid
Published: October 22 2010 10:29 | Last updated: October 22 2010 14:38
Ferrovial is preparing the sale of a 10 per cent stake in UK airports operator BAA, part of wider asset disposal programme aimed at paying down debt at the highly leveraged Spanish infrastructure group.
The Madrid-based company, which led a consortium in the €16bn ($22bn) purchase of BAA at the height of the credit boom in 2006, said on Friday it had “started a process for a possible sale of a minority stake in BAA”.
It added: “Initially, the proposed transaction is to divest 10 per cent of the equity in FGP Topco, parent company of BAA.”
Ferrovial, which also has toll roads, municipal services operations and construction businesses, holds just under 56 per cent of BAA. The proposed sale would cut its holding to 46 per cent, allowing the company to remove €15bn in BAA debt from its balance sheet, but also reducing sharply the profits it could book from the business in its own accounts. The rest of BAA’s equity is held by Canadian institutions and GIC, the Singaporean wealth fund.
The sale is likely to draw a strong field of possible bidders, particularly specialist infrastructure funds, private equity groups and sovereign wealth funds. Many sector specialists say the gradual return of financiers to the market, coupled with relatively cheap valuations, has created ideal conditions for buyers.
Citi estimated the implied equity value of a 10 per cent BAA stake at about £1.5bn.
Ferrovial has been under extreme financial pressure since the BAA deal, which closed just as a security services foiled a terrorist plot against transatlantic flights, resulting in an costly security crackdown at airports.
BAA said Friday there were no plans to change day-to-day management, nor its strategies or priorities, in the event of a sell-down of Ferrovial’s stake.
However the proposed sale is likely to raise questions about Ferrovial’s long term commitment to BAA, especially given the trouble it has faced with UK competition authorities.
The regulator last year forced to sell Gatwick airport at a heavy loss. BAA has also been told to sell one of the two Scottish airports that it controls as well as Stansted airport.
The global financial crisis has also hit Ferrovial and BAA hard, forcing them to postpone a complex financial restructuring and driving up the costs of new debt. A deep recession in Spain has also hurt the company, cutting revenues in the domestic construction and toll road businesses.
However, the company says its order book in other markets is healthy, while airlines were seeing a rebound in passenger volumes and road traffic volumes have also improved this year after a dismal 2008 and 2009.
Ferrovial has sold assets from across the group in an effort to shore up its strained balance sheet. It recently sold 10 per cent of a prized motorway asset in Canada for €640m.
Last year it merged with Cintra, its separately listed toll road business, in an operation aimed partly at freeing up cash which also diluted the Del Pino family’s stake to below 50 per cent for the first time in the company’s 60-year history.
Ferrovial said on Friday that the sale was aimed at establishing a market value for the UK airports business. “We have taken the decision to go to the market to sell a minority stake of BAA’s capital, though the completion of any sale will depend on the offers received,” said Iñigo Meirás, the chief executive.
additional reporting by Pilita Clark in London
Copyright The Financial Times Limited 2010.