BAA Buyout Reverberates At Indianapolis Int'l

Jun. 7--Indianapolis International Airport, an economic engine for the entire region, was pulled into the orbit Tuesday of Rafael del Pino, an ambitious Spanish construction scion leading a new wave of global investing.

His firm, Madrid-based Grupo Ferrovial, teamed with Singapore's government to win control of publicly traded British Airport Authority from the London executives who had fought the acquisition for months.

The 7,000-acre Indianapolis airport, host to 10 major and 19 regional airlines, as well as a FedEx cargo hub, retail center, hotels and maintenance depots, is only a farflung piece of the $10 billion BAA global empire.

Indianapolis airport officials say they doubt operations will change as BAA, which manages the airport, merges into Ferrovial. But just how the local airport became caught up in a piece of international financial intrigue stands as an example of the shrinking globe.

Airport officials brought in BAA in 1995 as managers as part of a privatization effort intended to save $100 million. The effort marked a first-of-its-kind experiment in privatization, followed closely around the nation.

BAA overhauled airport retail, adding a food court and restaurants, news and gifts stores and about a dozen specialty retail shops.

It also administered other changes, including revamping the parking system.

Indianapolis Mayor Bart Peterson, who entered office with BAA already managing the airport, said he wanted to learn more about the sale of the British firm.

"I've been very comfortable with BAA," Peterson said. "The nationality of the company shouldn't make a difference. It's about their competence."

When BAA's stock price was slow to gain value, Ferrovial organized a $19 billion takeover, promising to find new ways to raise BAA revenue. BAA's board approved the offer Tuesday over a competing bid from New York investment bank Goldman Sachs, which was backed by Canadian pension funds.

Though the deal would raise Ferrovial's debt, del Pino told British reporters his firm could manage the takeover without breaking up BAA or raising fees at the airports it manages.

What del Pino saw in the British firm, which operates the largest airports in England, was a secure source of new cash that many investors now are zeroing in on.

In America's Midwest, foreign investors are buying and leasing highways, tunnels, bridges and airports, securing the endless stream of tolls and fees paid by public users. The dependable cash flow is useful in securing low-interest loans that can be applied to other acquisitions.

Indeed, Ferrovial is the driving force behind Cintra-Macquarie, the Spanish-Australian venture that last winter leased the Indiana Toll Road from the state. Ferrovial owns Cintra, which paid Indiana $3.58 billion for the right to manage the 157-mile-long toll road and hold on to driver's toll payments for 75 years.

If BAA's transition to Spanish control is rocky and airport fees do go up, air travelers could end up paying higher ticket prices. However, Indianapolis airport officials doubt the city will feel any tremors. Local officials expect the current executive team will remain in place. They note the airport board and not the firm managing the airport will guide the two major expansions under way, which involve a new passenger terminal and a larger FedEx hub.

"We don't anticipate any changes" in airport operations, said Indianapolis airport spokeswoman Patzetta Trice. "We are going to continue to do those things that are under the purview of the contract."

Trice pointed out the Spanish firm would inherit the BAA- airport contract that spells out the manager's duties. That contract expires in late 2008.

Ferrovial, founded in 1952 by del Pino's father as a railroad engineering firm, moved far beyond its roots in 1999. That's when the son, now 50, raised cash by selling shares in the company to investors on the stock market.

Since then, Ferrovial has been on a buying spree that has taken it across Europe to the Indiana Toll Road.

Although the controversial toll road deal distressed some Indiana residents, financial analysts say the wave of infrastructure investing is a sign of the times. Americans are pouring out tons of cash for imports.

"The U.S. is running a $2.25 billion trade defict per day," said financial analyst Richard Bove of Punk Ziegel & Co. in Tampa Bay, Fla.

"Holders of that surplus have to invest that money somewhere. If Americans don't like it, they ought to stop importing goods and start buying things made in America," Bove said. "Foreigners have the cash to come to America and buy hard assets. In the end, Americans are left with the debt they created buying all of this (stuff) we import, and foreigners are left to own the hard assets."

Star reporter Brendan O'Shaughnessy contributed to this story.


BAA plc

--What: World's largest airport operator.

--Headquarters: London.

--Chief executive officer: Mike Clasper.

--Locations: Owns and operates seven UK airports and has operations in Italy, Australia and Hungary. In the U.S., it manages Indianapolis International Airport and retail operations at Baltimore, Pittsburgh and Boston-Logan airports.

-- Worldwide employees: About 12,500.

-- Indianapolis employees: About 400.

-- 2005 net profits worldwide: $545 million.

Grupo Ferrovial

--What: One of Europe's leading specialists in the design, construction, financing, maintenance and management of transport, urban and services infrastructure.

--Headquarters: Madrid, Spain.

--Chief executive officer: Joaquin Ayuso.

--Locations: It manages the Sydney airport in Australia and Antofagasta airport in Chile. Last year it acquired Zurich- based airport handling company Swissport, which operates at more than 170 airports in 40 countries.

--Employees: 57,247.

--2005 profit: About $500 million.

Goldman Sachs Group

--What: Leading global investment banking, securities and investment management firm.

--Ticker: GS.

--Headquarters: New York.

--Chief executive officer: Henry M. Paulson Jr.

--Locations: North America, Asia-Pacific and Europe.

--Employees: 31,000-plus.

--2005 net earnings: $5.63 billion.

Sources: Company reports, Associated Press