Balfour Beatty has rejected the bid by John Laing Infrastructure Fund Ltd to acquire its entire PPP portfolio for approximately £1 billion.
The Board of Balfour Beatty said it had “carefully considered” the non-binding proposal from John and concluded that the proposal falls significantly short of its own view of the value of the portfolio.
The Directors' Valuation of the PPP portfolio stood at £1.05 billion, as at 28 June 2014. However, the Board said that the Group's targeted approach to selling individual assets as each investment matures, combined with the current and expected future strength of the market, had led it to conclude that the realisable value of the PPP portfolio continues to be substantially in excess of the current valuation.
The Board now intends to publish an updated Directors' Valuation in January 2015 which will take into account recent contract wins, further investments and disposals in the period since June, together with a further review of underlying project valuations.
It will also separately seek to provide an indicative value range for the current investments pipeline. The Board said that in combination, these will set out the Board's view of a market value for the existing PPP portfolio and the pipeline.
In addition, the strategic value and synergies from owning the current Investments business - both the PPP portfolio itself and the skilled team that operates and develops the business - is seen as material to the Balfour Beatty group as a whole.
The Board said the Group's Construction and Support Services businesses derive real value from the Investments business being in the Group, something which needs to be taken into account in valuing the Group as a whole, and in evaluating any proposal to acquire the Investments portfolio or business alone.
However, this has not been a factor in rejecting the JLIF proposal, given the substantial valuation gap versus the Board's view of realisable value. The Board will provide further comment on what it describes as “broader synergistic benefits” which are of real value to shareholders when it publishes the January 2015 Directors' Valuation..
Timing of KPMG Review
Commenting on the current review of projects in the UK Construction business by KPMG, the Board said this is “well progressed” and that field work will be completed by the end of the year. The scope of the report is unchanged and will be delivered to the Board in January.
The Board intends to announce the key findings and conclusions from the review as soon as they are available, which is likely to be in the second half of January.
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