JLIF: Balfour Beatty rejection ‘difficult to understand’

London-listed John Laing Infrastructure Fund has questioned Balfour Beatty’s reasons for turning down its £1bn PPP portfolio bid.

In response to Balfour Beatty’s rejection of its £1 billion (€1.3 billion; $1.6 billion) bid for the firm’s public-private partnership (PPP) portfolio, John Laing Infrastructure Fund (JLIF) said it was “disappointed” and that the basis for Balfour Beatty believing the portfolio was worth more was “difficult to understand”.

Specifically, JLIF questioned Balfour Beatty’s reference – when rejecting the offer – to a value uplift in one of its assets. JLIF said in a statement that Balfour Beatty “appeared to use the price of the recent sale of one asset for £61.5 million as evidence to support a substantial uplift in valuation for the entire portfolio.”

It added: “JLIF believes this is overly optimistic, considering the evidence from the many transactions in which JLIF has been involved over the intervening months.”

JLIF first approached Balfour Beatty with a proposal in May this year that amounted to a possible £200 million premium on the portfolio’s directors’ valuation of £766 million. This proposal was turned down.

Then, on 1 December, it made a non-binding proposal to acquire the portfolio for approximately £1 billion in cash. This bid, which followed a new directors’ valuation in August, was turned down at the end of last week.

JLIF said it continues to believe shareholder value will be maximised if the PPP assets are “owned by an infrastructure fund with a lower cost of capital which specialises in low risk, operational infrastructure assets”.

It added that its proposal would deliver “a certain and significant cash return” for shareholders “rather than relying on intermittent disposals in varying market conditions”.

JLIF does not appear ready to walk away any time soon. It said it “awaits with interest another revised valuation of the portfolio from Balfour Beatty and in the meantime will continue to evaluate all other options for unlocking the portfolio”.