Gatwick operator BAA is understood to have drawn up plans to hand back cash to shareholders in the event of a higher hostile bid.

The company rejected an offer of 810p a share from a consortium led by Ferrovial, the Spanish infrastructure group, on Friday.

Fearing Ferrovial or a rival bidder could return with a much higher offer, closer to 900p a share, BAA has reportedly prepared plans for a special dividend of up to £1 billion to keep shareholders onside.

BAA is also planning to say it will implement a wide-ranging review of its costs, in addition to the Delivering Excellence efficiency drive the company announced in November.

To fund a special dividend BAA is likely to have to raise additional debt.

In February, the company raised almost £2 billion, bringing its net debt to £5.3 billion.

Ferrovial was forced into revealing details of its offer by a looming deadline from the Takeover Panel to announce a firm intention to bid or walk away by April 24. The offer document shows it wants to keep together BAA's UK airports and to work with the Government and the Civil Aviation Authority to deliver industry plans on runway and terminal development.

BAA's UK estate is made up of Heathrow, Gatwick, Stansted, Southampton, Aberdeen, Glasgow and Edinburgh airports.

The company also has interests in the United States, Australia, Italy and Hungary but Ferrovial said it would focus investment in the UK and to enhance capacity, in particular, in South-East England.

The consortium, which includes a Canadian fund manager and the private equity investment arm of the Singapore government, has held meetings with the UK Government and the CAA since revealing its intention to bid. It has also held an initial meeting with the trustees of the BAA pension scheme.

BAA told Ferrovial its offer worth £8.75 billion "did not begin to reflect the value of BAA's unique portfolio of airport assets".

Tuesday, April 11, 2006