BAA to Acquire Duty Free for $674 Million

Britain’s BAA, which operates seven British airports, including Heathrow and Gatwick near London, said it agreed to buy U.S. duty-free retailer Duty Free International Inc. for about $674 million. In its first major acquisition in eight years, BAA agreed to pay $24 a share for New York-based DFI, the fifth-largest duty- and tax-free business in the world. DFI stock rose $3.625 to close at $23.75 on the NYSE. The company said the deal would make BAA the second-largest duty- and tax-free business in the world after Duty Free Shoppers, which is owned by LVMH Moet Hennessy Louis Vuitton, the French maker of champagne, handbags and other luxury goods. DFI sells tobacco, liquor, perfumes, cosmetics, jewelry and other gift items, free of excise taxes and duties, at about 175 stores at airports and other locations. In its latest fiscal year ended in January, it earned about $21.4 million, or 79 cents a share, on sales of $571 million. In addition to airport shops, DFI operates in-flight duty-free shopping services, Canadian and Mexican border duty-free stores and a diplomatic and wholesale operation serving embassies and cruise ship ports. BAA plans to fund the acquisition from existing resources and does not expect the purchase to hurt its earnings.