OPINION: Bad news for BAA after leaks to press

The interim report by the Competition Commission into the ownership of the most important London and Scottish airports by BAA was in the news last week.

Anthony Hilton
Anthony Hilton

The commission will not produce its final report until later this year, but said that at this stage it thought the monopoly may not be acting in the consumer's best interest and there might be a case for breaking up the business.

Analysts quickly picked up the theme and suggested that if Gatwick or Stansted were sold they would fetch many billions.

So far, so predictable. The surprise came at the weekend when the Sunday press had a string of stories about how former executives and directors of BAA were being sounded out by possible buyers. But in spite of the stories, the names of these individuals, and the companies with whom they were talking, were not disclosed.

This raises an interesting question. The stories were obviously deliberately leaked, but what was the point? Given that no names appeared, who was supposed to benefit?

It is a favourite tactic of private equity houses to destabilise their target companies by leaking their interest to the press and thereby putting the board on the back foot.

The idea is that such a head of expectation is built up among shareholders that it becomes almost impossible for the board to refuse to do a deal.

The skill from the private equity standpoint is to generate so much enthusiasm for a sale that no-one notices that the price it is offering is too low.

It may be that a similar tactic is afoot here. We cannot be certain yet that the competition authority will order a break-up, and we do not know how the BAA board will respond - although there was a cleverly planted story in one paper that said Ferrovial, the Spanish owner of BAA, might be well pleased just to be left with Heathrow if it can get a good price for the others.

What, therefore, might be the case is that these low-key stories about consultations are designed to create an expectation of a sale so that, when the final report comes out, there will be no wriggle room left for BAA.

Thus its board will not be minded to resist, to appeal against the verdict, or even simply to string matters out, so life is made more difficult for the potential buyers.

Anthony Hilton is City commentator on London's Evening Standard

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