Companies thought to be interested in PFI specialist include Spanish firms Acciona and Ferrovial

PFI specialist John Laing last week became the latest company within the industry to announce that it is on the receiving end of a takeover approach.

The company, which invests in PFI stakes, would not disclose the name of the interested party but the City this week said that it was likely to be an overseas contractor looking to invest in PFI projects and gain expertise from the UK’s maturing market.

Spanish companies such as Acciona and Ferrovial were mooted as possible buyers, as well as Australian bank Macquarie.

Institutions and funds looking to increase exposure to the PFI market are also possible suitors. These include the Barclays UK Infrastructure Fund, the Secondary Market Infrastructure Fund and Hermes.

A statement issued by John Laing to the stock exchange last Friday said: “The board confirms that it has received an approach with regard to a possible offer but emphasises that this approach is in very preliminary form.

“The board stresses that there can be no certainty that any offer will be made for the company’s shares.”

Laing’s shares rose 16%, or 41p, to 341p after it made the announcement last Friday, its highest value in four years.. As a result of the share movements the company’s market capitalisation rose to £730m.

Laing is considered an attractive investment because it has made a success of its change in strategy since selling its troubled construction business to Ray O’Rourke for £1 in 2001.

There can be no certainty that any offer will be made

John Laing statement

It has a stake in 49 PFI projects worth about £335m. Most recently it sold its stake in Defence Management Holdings in October to Serco for £6m, and last October it sold its stake in the M40 motorway for £26m.

This week the company sold a 50% stake in four PFI projects to Allianz PFI holdings for £30m. Laing has retained a 50% direct interest in each of the projects.

Laing is preferred bidder on several large schemes including the £800m Leicester Pathways Hospitals project, the £240m South Lanarkshire Schools project and a £228m road project in Finland.

However, one setback for Laing in recent months was the government’s guidance on PFI refinancing for local authorities, which was widely thought to have been interpreted by councils as a warning against refinancing PFI projects.

David Wylde, managing director of PFI finance adviser DWPF, said: “This guidance has increased pressure on the public sector, which needs to justify value for money when the private sector is seen to be taking ‘windfall gains’.

“Clearly if the PFI–PPP market is to grow and become more efficient and competitively priced then it is essential that investors can refinance to generate greater liquidity. Both sponsors and financial investors will soon run short of capacity if they are unable to recycle their investments.”

Overseas companies eyeing the UK

Who are they and what do they want?

In general terms the outside perspective is that, in the long run, there is a lot of work available in the UK, with clients such as BAA saying it has about £9.5bn to spend on construction in the next decade. There is also the prospect of the 2012 Olympics and nuclear decommissioning.
With regard to the PFI, companies in countries such as Spain and Germany are keen to increase their exposure to the British market. They are attracted by the projects themselves, and they also want to buy UK expertise in a market that is mature here, but emerging elsewhere.