Contractors with infrastructure assets, especially in the PFI sector, are likely to be targets for takeovers following the recent offers for John Laing and Amec.
City analysts are tipping Alfred McAlpine, Balfour Beatty and Carillion as attractive buys because of the value of PFI assets such as Carillion’s part in the £12bn Allenby/Connaught barracks PFI (pictured). The Swedish contractor Skanska, which is the second biggest investor in UK PFI, could also be subject to a bid.
Paul Rogers, an analyst at ABN Amro, said the value of these firms’ PFI projects, combined with their prospects for winning work in emerging PFI markets outside the UK made infrastructure companies attractive.
He said: “The UK PFI market is enormous and the government will continue to use PPPs to fund infrastructure projects for a long time.”
The UK PFI market is enormous and the government will continue to use PPPs for a long time
Paul Rogers, ABN Amro analyst
The battle for Laing intensified last week when investment fund Henderson increased its bid. This latest offer trumps the 385p per share recommended offer by German insurer Allianz last month and is 50p higher than Henderson’s original September bid. As Building went to press Laing had not responded to the offer.
Meanwhile, Amec rejected a reported £1.5bn bid from private equity houses First Reserve Corporation and Texas Pacific Group saying it “significantly undervalued the company”. First Reserve specialises in buying energy companies and Amec’s energy business would fit in well with its existing acquisitions which include oil, gas and coal companies.
Infrastructure assets are attractive to private equity funds because they provide long-term, inflation-protected income at a premium to standard equity investment.