Henderson’s bid for PFI specialist pushes shares up 32% as dealers wait for rival bids

City analysts were tipping a bidding war for PFI contractor John Laing this week after Laing’s board accepted an £887m offer by investor Henderson Fund Management.

As Building went to press on Wednesday, Laing chief executive Adrian Ewer said the PFI specialist was “not in discussions with any other bidder”. However, he added that he would be amazed if “someone else didn’t throw their hat into the ring”.

PFI industry-watchers said a rival bid to Henderson’s confirmed offer of 355p an ordinary share, would be likely to come from another institutional investor, as opposed to a competitor such as Innisfree or Amec. One City source said: “Everyone I know has been having a look at Laing in the past week to see if they can get in on the act. The main driver is its guaranteed cash flows.”

The company was involved in 50 projects at the end of June, including a £319m south Lanarkshire schools deal.

According to City analysts, potential suitors for the business could include Deutsche Bank Infrastructure Fund, Australian bank Macquarie, HSBC, Spain’s Ferrovial, Balfour Beatty or PFI investor Secondary Market Infrastructure Fund.

It is understood that American investment bank Merrill Lynch has spent the past 12 months considering whether to bid for Laing but decided against it.

Rumours of war …

As soon as Laing announced on Thursday 14 September that it had been approached by a bidder, City analysts were predicting that the eventual sale price would be up to 40% of its closing share price the day before. By mid-morning on Wednesday this week the price had risen to 31.7%.

Everyone I know has been having a look at Laing in the past week to see if they can get in on the act

Investment source

Laing’s share price had risen 31.7% since the news of Henderson’s interest was leaked last Thursday. It had reached 363.25p by Wednesday morning (see graph).

Ewer accused the market of “getting ahead of itself” in assuming that another buyer would come forward. However, he added that under stock market rules, prospective bidders would have 21 days from 10 October to beat Henderson’s offer.

Analysts cast doubt on whether anybody would be prepared to pay more then 370p a share to do this. One said: “It is a definite possibility that someone else will come in from the institutional side for Laing. It is just a question of whether they are willing to accept what is likely to be, at 370p-plus, a low-yielding investment.”

It also emerged this week that Henderson was the “mystery bidder” that held abortive talks with Laing in December last year (Building, 9 December). Paul Woodbury, a partner at Henderson, declined to comment on those talks, and refused to say if Henderson would increase its offer if a rival bid were made.

He said Laing’s clients should not be concerned at the bid as Henderson worked for some large pension funds that “want to get into PFI for the longer term”.

Woodbury also pledged that there would be no changes in the top management or staff at Laing as a result of any deal.

If Henderson is successful then Laing will become a private business, and for the first time in its history the Laing family, which currently owns 3% of its issued shares, would not be connected with it.