Balfour Beatty has rejected the bid for its public-private partnership (PPP) portfolio made this week by John Laing Infrastructure Fund (JLIF) saying the £1 billion (€1.26 billion) fell significantly short of its own view of the value of the portfolio.
The UK contractor’s directors’ valuation of the PPP portfolio stood at £1.05 billion (€1.33 billion), as at 28 June, 2014. However, it said the group’s targeted approach to selling individual assets as each investment matured, combined with the current and expected future strength of the market, led the board to conclude that the realisable value of the PPP portfolio continued to be substantially more than the current directors’ valuation.
It pointed towards the recent disposal of an investment at a 28% premium to the half-year directors’ valuation as evidence of this.
The board intends to publish an updated directors’ valuation in January 2015, which 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. Balfour Beatty said the combination of these would set out the board’s view of a market value for the existing PPP portfolio and the pipeline.
It added that 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” – was material to the Balfour Beatty group as a whole.
It said, “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.”
It said this had not been a factor in rejecting the JLIF proposal, given the substantial valuation gap versus the board’s view of realisable value.