Beleaguered builder Balfour Beatty (BBY) rises 4.8% to 192.1p on excitement surrounding a £1 billion bid for its investment arm. The move could see the break-up of the construction company, which has already seen off an all-share takeover bid from Carillion (CLLN) this summer.

Shares in Balfour are in demand following John Laing Infrastructure Fund's (JLIF) non-binding bid for the builder's investment portfolio, which includes around 60 public private partnership (PPP) and private finance initiative (PFI) contracts. John Laing meanwhile slips 2.2% to 120.6p.


The smart money is on Balfour turning down Laing's offer for a portfolio that includes the M25 motorway, the Queen Elizabeth Hospital in Birmingham and a student housing scheme at Aberystwyth University.

One of the crucial issues with this bid – at least according to Canaccord analyst Mark Howson – is whether or not the offer includes Balfour Beatty's US portfolio. 'The sensitivities are that if it is just UK, we value the UK current assets at £877 million plus a value for the UK pipeline of £55 million, which makes £932 million; so if it is just UK it is a fair price and could be looked at. If it includes the US, which having spoken to Laing's PR company Finsbury it appears to do, it is a poor price and should be dismissed in our view, as we value the combined UK/US business at £1.3 billion in our sum of the parts (SoTP).'

The likelihood therefore of the bid being turned down by Balfour also suggests that Laing may yet try to sweeten the deal. 'It seems a low bid, and a higher may follow,' reckons Alastair Stewart from Westhouse Securities. 'But JLIF, we presume, thinks it can get some BBY shareholders behind it - bearing in mind the rejected Carillion bid and the fact that KPMG have yet to report on Balfour’s UK contracts,' he concludes.

Issue Date: 01 Dec 2014