UK's BAA rejects 8.8 bln stg Ferrovial bid

LONDON, Mar 17 (Reuters) British airports operator BAA Plc said on Friday it had rejected an 8.8 billion pound (.5 billion) takeover offer led by Spain's Grupo Ferrovial, which said it was willing to raise the offer if BAA opened its books.

BAA, which owns London's Heathrow, Gatwick and Stansted airports, rejected a bid worth 810 pence a share in cash, lower than its close at 839p on Thursday.

The Spanish firm said it would be willing to bid higher if BAA's board allowed it to conduct limited due diligence and recommended the friendly takeover.

''It is the strong preference of the Consortium to proceed with the transaction on a recommended basis,'' Ferrovial said in a statement, indicating it could go hostile by taking its offer directly to BAA shareholders.

Ferrovial's consortium included an investment company directed by GIC Special Investments Pte Ltd and Canadian fund manager Caisse de depot et placement du Quebec.

Ferrovial had said in early February it was considering a cash bid for BAA as part of a consortium. Analysts had been expecting a bid pitched at closer to 900p a share.

''It's no surprise to me that they've come in this kind of level. They're really testing the water and I think that they are capable of higher,'' said analyst Owen Gibbons at Cheuvreux.

''However, I'd be flabbergasted if BAA went for much more than 900p a share, at least in a non-contested situation.'' A source close to the deal said: ''The rejection completely disregards shareholders interests..we think the share price has completely run away with itself since the news first leaked.'' Australia's Macquarie Bank is also considering an offer for BAA and is in talks with U.S. private equity group Blackstone and Canada's Ontario Teachers' Pension Plan about a potential bid, sources familiar with the situation have told Reuters.

BAA shares fell on news of the bid rejection but pared losses, trading down 1.7 per cent at 824p at 1257 GMT (1827 IST) after hitting a low of 812p.

The news helped BAA bonds, with the spread on its 5.75 per cent sterling bond due 2031 tightening 3 basis points, a London bond trader said.

European airports have been drawing investors attracted by a highly visible, long-term outlook which predicts traffic in Europe will double by 2020 to 2 billion passengers.

Busier skies will mean more revenues from both landing fees and auxiliary businesses, such as leases for shops and restaurants at airports.

BAA fought off Germany's Hochtief in December to buy control of Hungary's Budapest airport from the state for LONDON, Mar 17 (Reuters) British airports operator BAA Plc said on Friday it had rejected an 8.8 billion pound ($15.5 billion) takeover offer led by Spain's Grupo Ferrovial, which said it was willing to raise the offer if BAA opened its books.

BAA, which owns London's Heathrow, Gatwick and Stansted airports, rejected a bid worth 810 pence a share in cash, lower than its close at 839p on Thursday.

The Spanish firm said it would be willing to bid higher if BAA's board allowed it to conduct limited due diligence and recommended the friendly takeover.

''It is the strong preference of the Consortium to proceed with the transaction on a recommended basis,'' Ferrovial said in a statement, indicating it could go hostile by taking its offer directly to BAA shareholders.

Ferrovial's consortium included an investment company directed by GIC Special Investments Pte Ltd and Canadian fund manager Caisse de depot et placement du Quebec.

Ferrovial had said in early February it was considering a cash bid for BAA as part of a consortium. Analysts had been expecting a bid pitched at closer to 900p a share.

''It's no surprise to me that they've come in this kind of level. They're really testing the water and I think that they are capable of higher,'' said analyst Owen Gibbons at Cheuvreux.

''However, I'd be flabbergasted if BAA went for much more than 900p a share, at least in a non-contested situation.'' A source close to the deal said: ''The rejection completely disregards shareholders interests..we think the share price has completely run away with itself since the news first leaked.'' Australia's Macquarie Bank is also considering an offer for BAA and is in talks with U.S. private equity group Blackstone and Canada's Ontario Teachers' Pension Plan about a potential bid, sources familiar with the situation have told Reuters.

BAA shares fell on news of the bid rejection but pared losses, trading down 1.7 per cent at 824p at 1257 GMT (1827 IST) after hitting a low of 812p.

The news helped BAA bonds, with the spread on its 5.75 per cent sterling bond due 2031 tightening 3 basis points, a London bond trader said.

European airports have been drawing investors attracted by a highly visible, long-term outlook which predicts traffic in Europe will double by 2020 to 2 billion passengers.

Busier skies will mean more revenues from both landing fees and auxiliary businesses, such as leases for shops and restaurants at airports.

BAA fought off Germany's Hochtief in December to buy control of Hungary's Budapest airport from the state for $2.2 billion.

Analysts say a deal for BAA would be in a league of its own, given BAA has stakes in 20 airports, including the lucrative trio of London airports.

Ferrovial already has a stake in Britain's Bristol Airport in a joint venture with Australia's Macquarie Airports, Belfast Airport and UK train operator Amey.

Spain's Abertis controls Luton airport, another airport serving London.

Ferrovial has traditionally made most of its profits from Spain's booming building industry, but more recently has expanded overseas and into infrastructure services to offset cyclical construction operations.

It was working with Spanish bank Santander, Royal Bank of Scotland and Citigroup on the deal.

REUTERS SD ND1944 .2 billion.

Analysts say a deal for BAA would be in a league of its own, given BAA has stakes in 20 airports, including the lucrative trio of London airports.

Ferrovial already has a stake in Britain's Bristol Airport in a joint venture with Australia's Macquarie Airports, Belfast Airport and UK train operator Amey.

Spain's Abertis controls Luton airport, another airport serving London.

Ferrovial has traditionally made most of its profits from Spain's booming building industry, but more recently has expanded overseas and into infrastructure services to offset cyclical construction operations.

It was working with Spanish bank Santander, Royal Bank of Scotland and Citigroup on the deal.

REUTERS SD ND1944