27th Aug 2014 07:47
LONDON (Alliance News) - Balfour Beatty PLC looked to appease disgruntled shareholders Wednesday following the collapse of its merger talks with Carillion PLC, as it revealed that the value of its public-private partnership portfolio is now worth GBP1.05 billion.
This comes just weeks after the construction giant ended talks with its construction rival after disputing the structure of the enlarged group, the benefits the deal would bring to either company, and the sale of Balfour Beatty's US project management business Parsons Brinckerhoff.
A number of Balfour Beatty investors expressed their frustration, some in national newspapers, that a deal was not struck even after Carillion improved its offer.
The improved offer, which valued Balfour Beatty at GBP2.09 billion, would have meant Balfour shareholders receiving a 58.268% stake in the merged business as well as a cash dividend worth a total of GBP59 million. Carillion's initial approach had envisaged Balfour Beatty shareholders taking a 51% stake.
Balfour Beatty Wednesday said a review of its private-public partnership (PPP) portfolio has resulted in an increase in the total directors' valuation to GBP1.05 billion as at the end of June. This compared with GBP766 million at the end of December.
FTSE 250-listed Balfour Beatty said underlying movements during the first half reduced the directors' valuation, under a previous methodology, to GBP721 million. This reduction was driven by disposals made in the first half more than offsetting underlying increases and the inclusion of Balfour Beatty Infrastructure Partners for the first time.
The directors' valuation is intended to provide an indicator of the value of the PPP investment portfolio. Balfour Beatty said: "By using a consistent methodology over time, it has served to illustrate movements in the underlying value of the portfolio, rather than seeking to provide an open market valuation."
Overall, the UK portfolio valuation increased to GBP801 million at June 2014, compared with GBP491 million at June 2014 under the previous valuation methodology, representing a 63% increase. The North America portfolio valuation increased to GBP250 million at June 2014, compared to GBP230 million under the previous valuation methodology, representing a 9% increase.
The company said disposals of its UK assets in recent years have highlighted the growing difference between the director's valuation and the values achievable for our UK investments in the open market.
After reviewing recent disposals, the board concluded that the existing methodology no longer provided a good indicator of value and therefore revised the valuation methodology.
The changes to the UK portfolio can be broadly categorised into three areas: reduced discount rates, improved cash flow assumptions, and revised macroeconomic assumptions.
"In North America the nature of our projects is somewhat different to those in the UK, and there are only a limited number of market transactions against which to benchmark valuations," Balfour Beatty said
Balfour Beatty Infrastructure Investment Chief Executive Ian Rylatt said the increase in the directors' valuation is "reflective of the market leading portfolio of assets that Balfour Beatty owns."
"The revaluation ensures that investors have a clear understanding of the real value of assets held within our PPP portfolio. We also believe the valuation is still based upon somewhat conservative assumptions and we will continue to target sales at prices in excess of the Directors' Valuation," Rylatt said.
"The investments business should continue to generate further value, as we continue to invest in new assets," he added.
Looking ahead, Balfour Beatty said its current pipeline of work exceeds GBP4.5 billion by value across its key geographies of the UK and North America. Over the next five year it expects this pipeline to generate the potential to invest around GBP250 of equity investment, "delivering a sustainable pipeline of investment opportunities and subsequent future disposals."
Balfour Beatty shares were quoted down 0.7% at 245.20 pence early Wednesday morning.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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