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BAA's Investors Thwart Dawn Raid, Boosting Share Price

Strategic Insights

— 1 min read

BAA's management celebrated a record high for the company's stock price, closing at 905p, after a dawn raid attempt by Grupo Ferrovial, the Spanish bidder, was thwarted. Institutional investors, who hold a significant stake in the company, refused to sell their shares, opting instead to support the management's view that the airport group is worth at least 940p a share. Meanwhile, hedge funds, including Sprucegrove Investment Management and Henderson, bought into the stock, fueling speculation that Ferrovial will return with a higher offer or that Goldman Sachs will make a bid closer to 940p.

Key Takeaways:

  • Citigroup, advising Ferrovial, sought 150 million shares in the market but only managed to secure 69 million, indicating a possible change of heart by the investors.
  • The institutional investors Henderson, State Street, and Schroder Asset Management, which collectively hold around 15% of the company, purchased additional shares, supporting BAA's management.
  • Hedge funds, such as Sprucegrove Investment Management and Citadel Investment Group, disclosed holdings in BAA shares, hinting that they believe Ferrovial will return with a higher offer.
  • Richard Buxton, head of UK equities for Schroder Asset Management, expressed support for BAA's management, while Michael Taylor, head of equities for Threadneedle Asset Management, stated that Ferrovial's offer was closer to the company's value but still did not represent full value.
  • BAA shareholders have 14 days from Monday to accept or reject the Ferrovial offer of 900p a share, with the Spanish company needing 75% acceptances to secure the deal.
  • European airports have been attracting investors drawn to their long-term earnings potential, with air traffic forecast to double by 2020 to 2 billion passengers.

Statistics:

  • Citigroup sought to purchase 150 million shares but only secured 69 million, valued at around £600 million.
  • Institutional investors Henderson, State Street, and Schroder Asset Management hold around 15% of the company, with Schroder Investment Management owning 53 million shares (4.9%).
  • Hedge funds, such as Sprucegrove Investment Management and Citadel Investment Group, hold significant stakes in BAA shares.
  • Air traffic is forecast to double by 2020, reaching 2 billion passengers.

Sources:

  • The Times, 2006
  • Citigroup
  • Ferrovial
  • BAA
  • Goldman Sachs
  • Henderson
  • State Street
  • Schroder Asset Management
  • Sprucegrove Investment Management
  • Heyman Investment Associates
  • Citadel Investment Group
  • Trafalgar Asset Managers
  • Invesco Asset Management
  • M&G Investment Management
  • Legal & General Investment Management
  • Barclays Global Investors
  • Scottish Widows Investment Partnership

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