BAA says its worth more, plans dividend hike

25th May 2006

The British Airport Authority (BAA) said it considered the true value of the company to be above 940 pence a share.

Its full defense of this statement includes an aggressive dividend increase—to 8.8 billion pounds sterling, or 810 pence a share, takeover bid from a consortium led by Spain’s Grupo Ferrovial SA.

The statement says:

The Board of BAA plc (‘BAA’) is today posting a circular to shareholders explaining its views on the value of BAA.  The company is demonstrating its confidence for the future prospects of the business by setting out proposals for a 40% dividend per share increase in 2006/07 and a £750 million capital return, delivering significant value to shareholders.

The circular highlights the four main building blocks for the value of BAA:


The London airports, which are in a period of very strong growth, creating a demand for investment which the regulator has a statutory duty (among other duties) to incentivise.
The non-London airports business, which generates higher returns than the London airports and which has nearly tripled in size with the acquisition of Budapest Airport.
The opportunities that lie ahead, at home and abroad, for BAA’s first-rate management team to continue creating additional value in this dynamic sector.
Finally, in the context of a takeover bid, any bidder should expect to have to pay a premium to secure control of a company, particularly one which is the world’s leading and largest airport company, the last transport infrastructure stock remaining in the FTSE 100 index and which has prospects for growth with an in-built inflation hedge.
The circular provides a clear method for valuing these building blocks that has led the Board to the conclusion that the value of BAA is clearly higher than 940 pence per share.

As a demonstration of the Board’s confidence in the company’s value it has announced proposals for:

A 2006/07 dividend per share of 31.5 pence, an increase of 40%
A 2007/08 dividend per share of 33.7 pence, a further increase of 7%
A £750 million return of capital to shareholders by way of a tender offer, to be made as soon as practicable after the Ferrovial Consortium’s or any other offer lapses.
Subject to the outcome of the CAA review for the period 2008-13, the Board intends to pursue a progressive dividend policy after 2008, showing growth in real terms.

On April 7th, 2006, the Ferrovial Consortium announced its offer of 810 pence per share to shareholders of BAA.

Marcus Agius, BAA Chairman commented: “Over the last 15 weeks the Ferrovial Consortium has failed to offer BAA shareholders anything which approaches the true value of their company. We are confident about our company’s future - that’s why we are returning capital and increasing the dividend.  We remain determined that this company will not be sold to the Ferrovial Consortium or any other bidder on the cheap.”

Mike Clasper, Chief Executive of BAA said: “We have today set out a very clear view of BAA’s value. I am very confident that we can deliver. Our shareholders should stay with BAA.”

Shareholders who wish to reject the Ferrovial Consortium’s offer need do nothing and should not sign any document which the Ferrovial Consortium or its advisers send to them.

Further information for shareholders is contained in the circular being posted today and which will be available later today on

A pre-recorded interview with BAA’s Chief Executive Officer, Mike Clasper, is available from 7.30am today on BAA’s website -



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