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Hedgeweek Comment: Private equity and hedge funds could make beeline for BAA

The UK's biggest airport operator BAA may have to sell three of its seven airports in its home market (it also owns the airport at Naples in Italy) because of concerns about its market dominance, following a report from the country's Competition Commission.

The watchdog is recommending that the airport operator should be obliged to sell two of its three airports serving London and south-east England - Heathrow, Gatwick and Stansted - and that BAA should not be allowed to continue to own airports in both Glasgow and Edinburgh.

BAA described the competition body's verdict as 'flawed', while Spanish infrastructure company Ferrovial, which acquired BAA two years ago, said that dismembering the company would lead to poorer standards of services and a delay in the delivery of new runways.

But despite its opposition to the Competition Commission's findings, Ferrovial's shares rose as investors hoped a forced sale of some of BAA's assets could bring respite to the company's balance sheet at a time when the infrastructure and building conglomerate is struggling to refinance its heavy debt load.

Meanwhile, several bidders have signalled their interest in UK airport assets, including Manchester Airports Group, Frankfurt airport operator Fraport and German construction and utility company Hochtief. The Manchester group is prepared to join with US investors or private equity firms to buy a London airport, with Gatwick the most likely target.

It goes without saying that hedge fund managers will also be taking a close look at BAA's assets, and they and private equity firms may well have a significant role to play when a final decision on the company's future is taken next April.

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