The board of Balfour Beatty Plc has rejected the non-binding proposal from John Laing Infrastructure Fund Ltd (JLIF) to acquire its entire PPP portfolio for approximately £1 billion.
The board has concluded that the proposal falls significantly short of its own view of the value of the portfolio.
JLIF's offer had come after the publication, in August 2014, of the Balfour Beatty's review of the directors' valuation of the PPP Portfolio.
The directors' valuation of the PPP portfolio stood at £1.05 billion, as at 28 June 2014. However, Balfour's targeted approach to selling individual assets as each investment matures, combined with the current and expected future strength of the market, leads the board to conclude that the realisable value of the PPP portfolio continues to be substantially in excess of the current directors' valuation. This has been recently evidenced by the disposal of an investment at a 28% premium to the half-year Directors' Valuation.
As a result, the board intends to publish an updated directors' valuation in January 2015. This valuation will take into account recent contract wins, further investments and disposals in the period since June, and a further review of underlying project valuations. Separately, it will also seek to provide an indicative value range for the current investments pipeline. In combination, these will set out the board's view of a market value for the existing PPP portfolio and the pipeline.
In addition, the strategic value and synergies from owning the current Investments business - both the PPP portfolio itself and the skilled team that operates and develops the business - is material to the Balfour Beatty group as a whole.
Balfour said in its press release additionally:
The group's construction and support services businesses derive real value from the Investments business being in the group, something which needs to be taken into account in valuing the Group as a whole, and in evaluating any proposal to acquire the investments portfolio or business alone. This has not been a factor in rejecting the JLIF proposal, given the substantial valuation gap versus the board's view of realisable value. Nevertheless, these broader synergistic benefits are of real value to shareholders, and will be further commented on at the time of publishing the January 2015 directors' valuation.