BAA, the airports operator, hinted that it may yet offer shareholders a return of capital as it struck back with its first formal response to a £8.75 billion hostile takeover approach from Grupo Ferrovial, the Spanish construction company.

The airports group suggested that it was considering a special dividend as a way of returning cash to investors, but preferred to conserve such a tactic for later in the bid timetable.

In its first formal communication with shareholders over the Ferrovial approach, BAA highlighted what it called the inherent value in the airport group and urged shareholders to stick with it for strong future returns. “It’s not the right time. It’s not the right price,” Mike Clasper, the chief executive of BAA, said.

Marcus Agius, the chairman, and Mr Clasper said that the value of BAA’s London airports would increase by 20 per cent by 2008 to £12 billion and would provide a pre-tax real rate of return of 7.75 per cent.

Returns outside London were even stronger — with 12 per cent from the group’s Scottish airports, despite 17 years of falling airport charges, and a 14 per rate of return from Naples airport.

Regarding the possibility of returning capital to shareholders, Mr Clasper said: “We haven’t ruled anything in or anything out. We are trying to find that sweet spot where we can increase our returns to shareholders without alerting the regulator, who could simply take it all back in the next price review.”

The defence document focuses on four reasons that shareholders should stick with BAA, but analysts said that another owner could also benefit from these attributes and suggested that BAA had been deliberately brief in its response.

Damian Brewer, analyst at JPMorgan, said that Ferrovial’s bid — which at 810p is below the current share price — was unlikely to succeed at this level. Ferrovial repeated yesterday that it would be prepared to raise its BAA offer by a small amount, but would not say how much.

Mr Clasper declined to say at what price that BAA would begin to talk to a bidder but said that the value of BAA was “way, way north of 810p per share. In essence a hell of a lot more [than] what they’ve talked about so far”.

Mr Clasper added that Ferrovial had launched its bid opportunistically, ahead of a five-yearly regulatory review of BAA. The chief executive said that BAA’s share price had been low because of the uncertainty surrounding the review, but that it would rebound strongly, as has occurred in the water sector, once charges for the period from 2008 to 2013 had been set in January 2008.

BAA’s shares were about the 630p-a-share mark in the week before news leaked of Ferrovial’s approach. Yesterday they closed down 4p to 847p, but Mr Agius and Mr Clasper were insistent that even if BAA defeated Ferrovial the shares would not fall to pre-bid levels.

FLYING SOLO

BAA’s four reasons to stay independent

First-rate management

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