Spanish contractor's support services subsidiary could project manage BAA's airport build programmes

Support services firm Amey could be a beneficiary of Spanish contractor Ferrovial's £10bn takeover of BAA, announced this week.

City analysts are speculating that Amey, which has been owned by Ferrovial for the past three years, could be in line to project manage up to £7bn worth of projects planned for BAA's seven UK airports. This includes the £1.5bn Heathrow East project and a big redevelopment of Stansted airport.

One analyst at JP Morgan said Ferrovial would probably contract out building work, but could retain project management.

He said: "There hasn't been much yet from Ferrovial about potential synergies but there is one with Amey and project management. I suspect they'll contract out the construction work because it has fairly low margins in the UK."

Another analyst said Ferrovial often appointed its subsidiaries to manage the construction process.

Analysts also commented they were surprised by the Spanish firm's final offer of 950p a share for BAA. This bid, which was made by Ferrovial's Airport Development and Investment vehicle, contrasts with Ferrovial's initial offer in February this year. This was for 810p a share and valued the airports operator at £8bn.

Rich pickings: Amey is well placed to benefit from BAA’s £7bn order book, including work at Stansted airport
Rich pickings: Amey is well placed to benefit from BAA’s £7bn order book, including work at Stansted airport

BAA decided to accept the Spanish proposal despite a competing bid of 955p a share from the US investment bank Goldman Sachs.

In a statement, Ferrovial's ADI arm implied that it would concentrate on BAA's UK airports and sell off other parts of the business.

I suspect they’ll contract out building because of low margins

Analyst, JP Morgan

ADI said it planned to undertake a thorough review of BAA's other assets when it has access to detailed information, but planned to retain and focus on BAA's UK airports. Any proceeds from the sale would be used to pay off acquisition debt.

BAA's non-UK assets include Budapest airport in Hungary, and stakes in other airports in Naples, Melbourne, Perth and Darwin, as well as four airports in the USA.

ADI also pledged to meet BAA's current investment programme by making available extra funds through a £2bn capital expenditure facility over five years.

It claimed it could find efficiencies in BAA's current business by "reducing overheads, outsourcing functions where appropriate and improving procurement practices".

But senior industry sources treated the pledge with scepticism.

One said: "This is a highly ramped bid and the first thing they'll look to do is make economies. They might look at BAA and want to take a more traditional approach. As a client you have to say BAA has put a lot of money into the industry, which is a wonderful thing, but will that mean a lot if Ferrovial just wants to be an airport operator? You could see them taking a much more traditional approach."

Goldman Sachs has until 16 June to decide whether it wants to table an improved bid.

Amey declined to comment.