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JLIF confirms £1bn Balfour Beatty PPP bid

The London-listed infrastructure investment firm is attempting to buy the public-private partnership portfolio of developer Balfour Beatty.

John Laing Infrastructure Fund (JLIF), which joined the London Stock Exchange through an initial public offering (IPO) in 2010, is bidding to acquire UK developer Balfour Beatty’s public-private partnership (PPP) portfolio.

Responding to market rumours, JLIF confirmed it was making a non-binding proposal for the portfolio, subject to due diligence, worth approximately £1 billion (€1.3 billion; $1.6 billion) in cash.

JLIF said that, in the event of an agreement being reached, it would seek to finance the acquisition largely via an equity capital raise of ordinary shares – as it has done with previous acquisitions.

JLIF claimed that, “as a leading London-listed infrastructure fund investing in low risk, operational infrastructure assets” it “believes it would be an ideal owner of the portfolio”.

The firm said a further announcement would be made “when appropriate”.

Following five profits warnings in the last 18 months, Balfour Beatty has experienced tough times to say the least. However, its PPP portfolio has been profitable and provided a useful source of cash for the business.

According to broker and adviser Numis Securities, “Balfour Beatty shareholders are likely to want a good price in order to approve a sale of such a substantial part of the business”. It also raised the prospect of competition for the portfolio, saying that “there are likely to be a number of interested parties”.

Numis pointed out that, if it goes ahead, JLIF’s bid could result in the largest secondary capital raising undertaken within the listed infrastructure fund sector to date and represent a significant change of scale for JLIF which has a current market capitalisation of £981 million.

Numis added that “we can see the attraction of scale which we believe is an increasing requirement for pension funds investing in the sector”.

JLIF previously completed a portfolio acquisition when it acquired 11 assets from the Investors in the Community fund for £123 million in July last year.

The firm, which has been invited to bid for more than 60 stakes in 2014 to date, reported portfolio growth of 7.16 percent to £809.9 million (€1.0 billion; $1.3 billion) in its interim management statement for the period 1 July to 7 November 2014.

JLIF raised £270 million from its IPO in November 2010, using the proceeds to acquire a seed portfolio of 19 assets from developer John Laing Group.

Balfour Beatty demonstrated the strength of the secondary PPP market in June this year when it sold two PPP interests to funds managed by Dalmore Capital for £97 million, representing a total gain on disposal of £51 million.