"The bit that interests me though, and doesn't get widely reported, is that it was the City institutions that held most of the shares, and sold out"
Spot on. In the run up to the takeover, a lot of the business press had commented that BAA had a bright future, and that held long term the shares would have been a good investment.
However, a lot of them were also sharp enough to observe that the various fund managers, bankers etc who held shares would have one eye on targets and performance bonuses, and once they felt Ferrovial had bid a sufficient premium for BAA would sell out without hesitation.
BAA wasn't perfect, but british pension funds would have benefited from the dividends and appreciation in price of the shares. Because of a culture of short termism, a profitable and valuable piece of british infrastructure was surrendered.