Ferrovial set to up the ante in BAA takeover as it appoints Macquarie as co-advisor

SPAIN. The consortium comprising Ferrovial Infraestructuras (of which Grupo Ferrovial is the sole shareholder), Caisse de dépÃ´t et placement du Québec and an investment company managed by GIC Special Investments Pte Ltd created to acquire UK airports operator BAA, has appointed Macquarie Bank Limited as its financial co-adviser for that operation.

Macquarie will work in conjunction with the consortium’s current adviser, Citigroup Global Markets Limited.

Ferrovial Infraestructuras has also reached an agreement with Macquarie Airports under which the two parties grant each other conditional call and put options on the holdings of Ferrovial Aeropuertos (a 100% subsidiary of Ferrovial Infraestructuras) in the capital of the companies owning the rights to Sydney and Bristol airports, in Australia and the UK respectively.

Exercise of the options is conditional upon the acquisition by the Consortium of a controlling stake in the capital of BAA.

If that condition is met, MAp has the option to buy 20.9% of the capital of Sydney Airport and 50% of the capital of Bristol airport from Ferrovial Aeropuertos.

This arrangement seems to eliminate Macquarie as a rival bidder for BAA. It simultaneously strengthens Ferrovial’s hand while offering an attractive ‘sweetener’ to Macquarie.

The strike price of both options is based on the valuation of those assets by MAp in December 2005, net of any earnings distributions which those companies may make after the date of the agreement. Those prices currently amount to approximately A$1.009 billion Australian (€600 million) in the case of Sydney and ₤106 million (€154 million) in the case of Bristol.

Ferrovial Infraestructuras can exercise its put options, subject also to any pre-emptive rights of the other shareholders of each airport, at a -7.5% discount on the price of the call options.

Neither the call nor the put options have any price nor may they be exercised before the earlier of 90 days after the acquisition by the Consortium of control of BAA or in at most 365 days from the date of signature of the agreement.

More details soon.

About the key players

Macquarie Bank provides investment banking and financial services and employs over 7,600 people in 24 countries. Grupo Ferrovial and Macquarie Bank have collaborated successfully in a number of projects and initiatives in the last six years, including the IPO of Cintra, in which Macquarie divested its entire 40% stake, the acquisition of Chicago Skyway Tollway in Chicago (USA), and the appointment as preferred bidder of the consortium comprising Cintra and Macquarie for the acquisition of the Indiana Toll Road in Indiana, US.

MAp is one of the world’s largest private airport owners and operators with significant investments in six major airports- Sydney, Brussels, Rome, Copenhagen, Birmingham and Bristol.

Ferrovial is one of Europe’s leading construction, services and infrastructure concession groups, with annual revenues of €8,989 million, more than 68,000 employees and a presence in 40 countries worldwide. Ferrovial was founded as a construction company in 1952 and, while it maintains construction as one of its core activities, is now a diversified group, with other businesses (infrastructure, property and services) that are complementary to its core activity.

In recent years, Ferrovials strategy has been to expand and diversify in terms of activities and regions. In the 1997 to 2005 period, equity investments amounted to €6 billion, 80% in infrastructure and services. In 2005 Ferrovial derived 59% of its operating profit from infrastructure and services business.

Ferrovial has also made significant investments overseas, with 46% of operating profit coming from outside Spain. Ferrovial has investments throughout Europe (the UK, Ireland, Italy, Portugal and Poland), Canada, the US, Australia and Latin American countries, mainly Chile. Ferrovial’s revenues amounted to €8,989 million in 2005, and net income was €416 million.

Ferrovial’s airport investments include owning 50% of Bristol, 100% of Belfast City and 20.9% of Sydney Airport. Ferrovial has also recently acquired 100% of the share capital of the Swiss airport handling company, Swissport International, which operates in more than 180 airports worldwide and employs over 20,000 people.

HOW THE BAA TAKEOVER SAGA HAS EVOLVED TO DATE

8 February:

City shock in the UK as Spain’s Ferrovial announces it may make offer for BAA

BAA releases statement on potential Ferrovial bid

BAA shareholder welcomes possible takeover approach by Ferrovial; Macquarie ‘no comment’

10 February

BAA is “˜in play’ say sources, as private equity group announces interest

13 February

BAA bid speculation heats up in the City

15 February

Interest in BAA heats up as Singaporean government, Canadian funds suggest interest; Schroders goes on share buying spree

20 February

Macquarie Airports bid for BAA touted

24 February

Civil Aviation Authority warns BAA suitors that airport investment must be factored into financing