World Duty Free sale "likely", say analysts

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James Featherstone

11-Jul-2006

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Industry sources and independent analysts argue that Grupo Ferrovial is likely to sell BAA's retail division to concentrate on infrastructure management

Well-placed industry sources have told RavenFox.com that executives from new BAA owner Grupo Ferrovial are in talks with potential buyers of World Duty Free (WDF) and that a sale is "highly likely". The same sources also suggested that a management buyout of BAA's retail division, funded by venture capital, "was a real possibility". RavenFox.com understands that WDF's existing management is likely to remain in place in the event of a sale.

"There are already some conversations going on between Ferrovial and potentially interested parties that I know of for certain," said one source. "The current WDF management team are a good bunch, and any organisation that might want to buy the company would want a top management team to run it. I'm also aware of conversations with venture capital groups."

One leading supplier said: "We've heard nothing specific, but it wouldn't surprise me if WDF was on the table."

WDF has made a strong contribution to BAA's profits but is likely to be viewed as non-core by Ferrovial, whose core business is in construction and infrastructure management.

City analysts consulted by RavenFox.com rate a WDF sale as highly likely. Tony Mallon, CEO of private equity fund Star Capital, said "[Ferrovial] almost certainly went into this deal with a good idea as to what they'd have to sell to make it work. And inevitably, non-core business is the most likely sellable."

Richard Hunter at stockbrokers Hargreaves Lansdown said: "We'll have to wait and see what the competition authorities have to say, but I would think that simply because of Ferrovial's debt burden they'll have been thinking about a sale of non-core assets all along. And the duty-free business is certainly non-core for them."

The UK's Office of Fair Trading (OFT) is to conduct a study of the country's airport market with a particular focus on BAA's network of seven airports. An OFT press spokesperson said that the organisation may refer the Ferrovial/BAA purchase to the competition commission, but a decision has yet to be made. The spokesperson added that the OFT expects to report its initial findings on the airport market this autumn.

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World Duty Free sale "likely", say analysts

James Featherstone

Industry sources and independent analysts argue that Grupo Ferrovial is likely to sell BAA's retail division to concentrate on infrastructure management

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