Suitors 'neck and neck' in battle to win BAA board's backing OH,WAAAAA

The bid battle for BAA was on a knife-edge last night as rival consortia led by Ferrovial and Goldman Sachs vied for a board recommendation, with competing offers pitched at around 950p per share.

In a day of high drama, the board of the airports operator convened regularly as the Ferrovial consortium raised last week's £9-a-share bid, only for its offer to be trumped by Goldman's team.

Ferrovial then returned with a bid of about 950p per share, valuing the owner of seven UK airports, including Heathrow, Gatwick and Stansted, at £10.3bn. BAA also has £6.2bn of debts. This, too, was broadly matched by Goldman, whose consortium includes AIG, Canada's Borealis and Australia's Commonwealth bank.

The pair were said to be "neck and neck", with the offers within a whisker of each other on price and the BAA board focused on which was the more deliverable. In a short statement, BAA would only confirm it was "holding discussions with the Ferrovial consortium and is also currently in talks with another party". BAA shares closed up 23 at a high of 928p as traders said it was likely to fall into foreign hands.

Talks were expected to continue, with an announcement unlikely before this morning as the BAA board, led by chairman Marcus Agius and chief executive Mike Clasper, considered whether to recommend either offer.

While Mr Clasper has fiercely defended BAA's independence, there was a growing feeling in the City that he could not resist a 950p-a-share bid. One banker said: "The fact that BAA is talking to both of them suggests they are prepared to recommend at that level." The price is thought to include BAA's 15.25p dividend.

Last week, BAA rebuffed Ferrovial's £9-a-share bid, reiterating that "the intrinsic value of BAA is more than 940p per share". Ferrovial hit back, saying that accounting for BAA's convertible bonds cut that value by 28p per share, while exercising share options would take another 12p per share off any valuation.

Ferrovial also quibbled with BAA's argument that Budapest airport was already worth £300m - or 28p per share - more than the £1.3bn it paid for it last December. Ferrovial's consortium, which includes Canadian and Singaporean investors, said BAA shares traded at around 637p before it revealed its interest in February.

The long-running bid battle came to a head as Ferrovial reached day 46 in the timetable - the last point at which it could raise its bid. Goldman Sachs, which initially proposed a friendly deal at 870p per share, was last week given until Friday by the Takeover Panel to make any offer for BAA. However, the BAA board is understood to have asked Goldman to reveal its hand yesterday.

The bid battle has been complicated by the intervention of the Office of Fair Trading, which could lead to the break-up of BAA. In that scenario BAA's value is likely to increase.