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Ferrovial’s BAA Stake-Sale Boosts Heathrow Value, Cuts Debt

Ferrovial Chief Executive Officer Inigo Meiras said, “The sale is in line with our strategy to establish a market valuation of our assets.” Photographer: Matthew Lloyd/Bloomberg
Ferrovial Chief Executive Officer Inigo Meiras said, “The sale is in line with our strategy to establish a market valuation of our assets.” Photographer: Matthew Lloyd/Bloomberg

Spanish construction group Ferrovial SA’s sale of a 5.9 percent stake in BAA Ltd. will almost double the valuation of the London Heathrow airport owner to $8 billion and slash the builder’s own balance-sheet debt by $20 billion.

Ferrovial agreed to sell the stake in BAA’s FGP Topco Ltd. holding company to two funds run by U.S. infrastructure operator Alinda Capital Partners for 280 million pounds ($439 million), the Madrid-based company said in a statement today.

While the deal values BAA at 4.76 billion pounds, less than half the 10 billion-pound purchase price in 2006, that’s better than the 2.5 billion-pound to 3 billion-pound consensus, Kepler Capital Markets analyst Emilio Rotondo said. Ferrovial’s stake also drops to a minority 49.99 percent, removing BAA from the group’s balance sheet, which will now show debt of 5.19 billion euros ($7 billion) compared with 19.75 billion euros previously.

“Considering the total amount to be received by Ferrovial and that the implied valuation is well above expectations, we believe this is good news,” Rotondo said in a note to clients.

Ferrovial was trading 6.5 percent higher at 9.08 euros as of the close in Madrid today for the biggest jump since July 15, 2010. The shares have added 22 percent this year, and the builder is the only gainer on the 30-company Bloomberg Europe Construction and Engineering Index over the past three months, with a market value of 6.66 billion euros.

Credit-default swaps on BAA’s debt fell 21 basis points to 227 points, according date from CMA. CDS prices fall as the perceived risk of default declines.

Heathrow Blocked

“The sale is in line with our strategy of establishing a market valuation of our assets,” Ferrovial Chief Executive Officer Inigo Meiras said. “We would like to underline that our commitment as a long-term investor in BAA remains in place.”

The valuation of BAA was in doubt after Britain’s coalition government blocked plans for a third runway at Heathrow, Europe’s busiest airport, and regulators pressed for a breakup of its assets to create greater competition in the U.K. market.

BAA sold London’s Gatwick airport to Global Infrastructure Partners for 1.51 billion pounds in 2009 and said last week it had agreed to dispose of a terminal in either Glasgow or Edinburgh, Scotland. The unit may also have to sell London Stansted, pending the outcome of an antitrust appeal.

Ferrovial said it’s disposing of the BAA stake to raise cash for other projects. The builder is shortlisted to run Madrid Barajas and Barcelona El Prat airports, which Spain is selling to cut debt, with Oct. 31 set as the deadline for bids.

Alinda, based in New York, owns and operates U.S. toll roads including the Detroit-Windsor Tunnel and Alabama’s Tucaloosa Bypass Bridge. Its managing partner, Chris Beale, will join the boards of both FGP Topco and BAA, with the sale likely to be completed by the end of this month, the statement said.

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