With a deep pool of capital ready to be deployed, KKR is considering adding John Laing to its infrastructure portfolio, Infrastructure Investor has learned.
Talks between the two parties are at an early stage – an offer price has not yet been tabled, a source told Infrastructure Investor – but “KKR likes the strategy John Laing’s team has put together, and for that reason, the plan is for the current management team to stay in place”, this person said.
The strategy referred to is one the company’s chief executive, Ben Loomes, adopted last November after conducting a strategic review and roughly six months after taking the helm at the company.
The objectives announced at the time include refocusing and optimising the company’s greenfield PPP business in the US, Australia and Colombia; and expanding it to include PPP-like projects or what the company calls “adjacent greenfield projects”, which is investing in projects that have a similar risk-return profile to PPPs but could include a highly-rated private sector partner rather than one from the public sector.
An example is the 50:50 partnership John Laing announced last month with Macquarie Capital. The two firms have created Brigid Investments, a platform that will invest in retirement living units developed in partnership with McCarthy Stone, a UK developer and manager of retirement communities.
In addition to transportation and social infrastructure, sub-sectors John Laing has traditionally invested in, the company is also looking to expand into the mid-market core-plus infrastructure space, with a view to diversifying its business.
“Success in this area will require a specialist core-plus investment team,” Loomes wrote in his statement published as part of the company’s 2020 full-year results published in March. “Building this will take time, but I am confident we can do so.”
In January, John Laing hired Angenika Kunne from Macquarie’s Green Investment Group, to serve as investment director in Europe focusing on adjacent greenfield sectors, including energy transition. The latter, along with digital infrastructure, are two sub-sectors John Laing has identified as targets for growth.
More recently in April, John Laing announced its first core-plus investment, acquiring 100% percent of the equity of two regional fibre-to-the-premises companies in Germany for £27 million ($38 million; €31 million).
“An acquisition by KKR would enable John Laing to accelerate its move into digital infrastructure and energy transition,” the source said. “Basically, the rationale is that John Laing could grow at a faster pace under private ownership than as a listed company.”
KKR has until 3 June to make an offer, John Laing said in a recent statement.
Should the deal go through, it will be one of several take-private deals in the infrastructure space that have occurred in recent months.
“For managers, prices are at a lower end of the market than they were previously, while even for shareholders of companies which have not been among the worst affected by the crisis, take-privates offer an opportunity to escape the volatility of stock exchanges,” Infrastructure Investor reported in its April cover story on take-private transactions.
At the time of publication, John Laing’s share price was 364p, up 19 percent since May 5, the day before talks of a sale were confirmed.
John Laing and KKR declined to comment for this story.
Zak Bentley contributed additional reporting.