The £9 a share plus needed to do the trick begins to look a very tall order indeed.A pensions muddle that’s hard to solveMy thanks to David Blake, director of the Pensions Institute, for the following little tutorial on the history of pensions, delivered to me over dinner the other night. This insists that the company is worth at least 940p a share even on a standalone basis, ignoring any premium a bidder would be required to pay for control All that may be academic now. What certainty can bond holders have that the cash flows remain to support the coupon?In all the excitement about Mr Fingleton’s intervention, the release of BAA’s formal defence document rather got lost in the wash. Mr del Pino will have to work miracles to prevent them withdrawing their support.

It may even be impossible to securitise debt in a company which is under threat of break-up. Nor should Goldman Sachs, which has approached BAA with an alternative proposal pitched at 870p a share, yet be discounted as a possible contender.Even so, most private equity bidders would have been holed below the water line by an intervention of this sort The adventure suddenly becomes that much more high risk Bankers are already worried enough about their security. For the bankers, this may be the uncertainty too far.Is Rafael del Pino, Ferrovial’s chairman, about to fold his tent and return to Madrid? BAA would be unwise to count on it Everything he has done so far suggests he’s utterly serious. The regulatory risk of a competition inquiry will further upset the delicate balance of the largely debt financed takeover vehicle. In practice, however, the OFT’s intervention could hardly be more damaging. Reassuring noises from the Ferrovial consortium last night to the effect that it is perfectly happy to live with the competition inquiry look to me to be premature.It is hard enough for private equity even to go hostile.

With the quid pro quo of lighter regulation, BAA could no doubt live with the enforced disposal of Gatwick and Glasgow, but a total break-up, leaving the company with, say, just Heathrow, would be regarded as disastrous.If the effect of a more limited break-up on BAA is neutral to positive, then in theory it shouldn’t make any difference to Ferrovial’s bid for BAA either. Mr Fingleton’s record suggests he’s a deregulator by instinct; let competition do the work instead.The question for BAA investors, on the other hand, is how far the competition authorities would want to push the issue. The effect on the company and shareholder value might even be mildly positive. This is a mighty powerful monopoly which prevents all possibility of competition in the airport market. As a consequence, prices have to be regulated instead.Even BAA would concede that a partial break-up might not be such a bad thing provided it was counter-balanced with less onerous price regulation.

Once the Civil Aviation Authority had taken the view that there could be no cross subsidisation between airports, much of the purpose of common ownership was lost.Yet as things stand, airports operated by BAA account for 63 per cent of all UK passenger traffic, with as much as 86 per cent in Scotland and 92 per cent in the London area. Before taking up his job at the OFT, Mr Fingleton occupied the equivalent position in Ireland, where he both ordered price deregulation of two of the country’s biggest airports and their break-up into separate companies.The prima facie case for something similar at BAA is a powerful one. Has Mr Fingleton got a case? It’s not just his two fellow countrymen, Michael O’Leary at Ryanair, and Willie Walsh at British Airways, who will think he has. If Ferrovial had acquired BAA under the false impression that the OFT had no objections to the present structure of the UK airport market, it might have had some legal claim over him.
But more on the implications for the bid later. Mr Fingleton admits that the timing of his announcement “wasn’t perfect”, but insists that once it became apparent that an investigation was a serious possibility he had no option but to get it into the public domain. Hard on the heels of ordering a supermarkets inquiry, he’s lobbed a ten ton rock into the middle of Ferrovial’s £8.8bn hostile takeover bid for BAA by launching a competition investigation which could ultimately result in the the airport operator’s break-up. This is a great example of the added value that BT broadband delivers.”.