Balfour Beatty, has announced that it has reached an agreement with funds managed by Dalmore Capital Limited (Dalmore) to sell a 12.5 percent stake in Connect Plus, the company which operates the M25 orbital motorway.

The sale is for a cash consideration of £103 million(US$137,68 million), which is in excess of the Directors’ valuation as at 30th June 2017. The sale, which is subject to Highways England consent, is expected to complete before year end. The proceeds from this transaction will be used to pay down borrowings in 2018.

As a result of this transaction, the Board’s expectations for both Group profit before tax and year end net cash in 2017 are higher than those included in the Balfour Beatty Trading Update on 12 December 2017. The expected profit on disposal on this transaction at £53 million (US$70,84 million) is £37 million (US$49,46 million) higher than the market consensus of £16 million (US$21,38 million) for Infrastructure Investments profit on disposal in 2017. The year end net cash, which was forecast to be in line with prior year, is now expected to be around £103 million higher.

In addition, Balfour Beatty has entered into a series of arrangements with funds managed by Equitix Investment Management Limited and Dalmore under which up to an additional 12.5 percent interest in Connect Plus may be sold by Balfour Beatty at an equivalent price. These arrangements lapse on 13 May 2018 and are subject to a number of conditions. Therefore there is no certainty that there will be any subsequent transaction.

For the year ended 31 December 2016, Investments in Joint Venture & Associates in relation to the Group’s 12.5 percent interest in Connect Plus was £78 million (US$104,26million) and it contributed profit before tax of £8 million (US$10,69 million) to the group’s results. The Group continues to hold a 27.5 percent stake in Connect Plus.

The Investment in Joint Ventures and Associates at 31 December 2016 reflects the net position after financial asset and swap liability revaluations. These revaluations will be recycled to the income statement as part of the gain on disposal of the group’s interest in Connect Plus. 

Leo Quinn, Group Chief Executive, said: 

“This transaction emphasises the ongoing attractiveness of our infrastructure assets and is in line with our declared intent to maximise value for shareholders.”