John Laing makes £1bn offer for Balfour Beatty assets

Leading infrastructure fund would take on Balfour's public private partnership contracts

John Laing Infrastructure Fund has confirmed a £1 billion bid for Balfour Beatty's public-private partnership portfolio, which could signal the break-up of the beleaguered business.

Balfour's portfolio of public private partnership (PPP) contracts include long-term agreements to run public projects such as schools and hospitals. Since joining the stockmarket in 2010, John Laing said it had proven itself to be a leading infrastructure fund and “an ideal owner” of Balfour's PPP assets.

In a short statement, the fund said it would finance the acquisition largely by raising money through an equity capital raise, as long as a deal is reached and due diligence is successful.

This offer comes on the back of a difficult year for Balfour Beatty, which has issued three profit warnings and seen its shares fall by more than a third, although they jumped by 5% following the announcement of the John Laing offer at the time of writing.

Its troubles have centred an Balfour's British construction and engineering services operation due to the impact of design changes, project delays and contractual disputes.

Previous talks of a £3 billion merger between Balfour Beatty and rival Carillion collapsed in August after Balfour's board refused to ditch plans to sell a US unit as Carillion had wanted.

Following Carillion's failed bid, Balfour reviewed its PPP portfolio and said it had increased by 46% in value. It was now worth £1.1 billion, Balfour said.

The portfolio includes 13 road projects, five hospitals, eight schools and 21 US housing military projects. The remainder of Balfour's business outside its PPP work includes construction projects in the UK and US, and rail maintenance in the UK, Germany and Austria.

The firm has lost a number of senior directors in recent months, including its finance director and former chief executive Andrew McNaughton. He will be replaced by Leo Quinn who will leave his job running defence technology firm Qinetiq, although he is not due to take up his new role until the new year.

Balfour is currently being run by executive chairman Steve Marshall, who led the group through its merger tussle with Carillion and has said he will himself step down once a new chief executive and chairman have been found.