Dalmore, Equitix clinch $1.9bn deal to acquire JLIF

The buyers said they are they ‘are well placed to […] mitigate the effect of declining concession lengths’ for the 65-asset PPP and PFI portfolio.

Shareholders of UK-based John Laing Infrastructure Fund have been advised to accept a £1.45 billion ($1.9 billion; €1.6 billion) offer from private fund managers Dalmore Capital and Equitix following three weeks of deliberation.

Despite reported criticisms from some shareholders that the offer is too low, JLIF directors have unanimously recommended that they accept it. The deal represents a 19.8 percent premium on the listed fund’s latest net asset value of 121.9 pence per share, published in March.

JLIF revealed on Monday that it had rejected an earlier, unsolicited offer from Dalmore and Equitix towards the end of June, which it deemed too low, although it did not disclose the size of the initial bid.

While the terms of the raised bid have not changed during the negotiating period, a newly-formed entity named Equitix Eday is joining the duo in two of the portfolio’s non-UK assets on an “own funds basis”. This is a result of Equitix – investing through Equitix Fund V – being unable to commit to the assets due to investment mandate concentration limits. This interest acquired by Equitix Eday is then likely to be sold on to one or more third parties.

Dalmore and Equitix said they “are well placed to support the JLIF portfolio during its investment cycle and mitigate the effect of declining concession lengths”. JLIF’s 65-asset portfolio of PPP and PFI projects has an average remaining concession life of 14-and-a-half years. Equitix Fund V has a 25-year term, while Dalmore Capital Fund 3 is a 15-year vehicle.

Despite the projects generating a 9.6 percent annual return since IPO and diversification beyond the UK, the share price has been subject to significant volatility over the past 12 months – particularly after UK shadow chancellor John McDonnell promised last September to bring all existing PFI contracts “back in-house” should his Labour Party gain power. Assuming the UK’s next general election occurs in June 2022 as scheduled, five of the portfolio’s assets will have seen their concession life expire by that point.

Dalmore and Equitix confirmed that JLIF directors David MacLellan, Talmai Morgan, Christopher Spencer, Guido van Berkel, Helen Green and Theresa Grant will leave their posts once the acquisition is completed, with the group’s delisting “not requiring listed company governance structures”.

However, the future relationship with JLIF’s investment advisor John Laing Capital Markets remains less clear, with the consortium stating that they intend to discuss this further with “a view to achieving optimal value and continuity of service”. It was unable to give any employment guarantees to those at JLCM working principally on JLIF-related matters.