Balfour Beatty announces partial sale of M25
Balfour Beatty, the international infrastructure group, announced that it has reached an agreement with funds managed by Dalmore Capital Limited (Dalmore) to sell a 12.5 percent stake in Connect Plus, the company which operates the M25 orbital motorway.
The sale is for a cash consideration of £103 million, which is in excess of the Directors’ valuation as at 30th June 2017. The sale is expected to complete before year end. The proceeds from this transaction will be used to pay down borrowings in 2018.
As a result of this transaction, the Board’s expectations for both Group profit before tax and year end net cash in 2017 are higher than those included in the Balfour Beatty Trading Update on 12 December 2017. The expected profit on disposal on this transaction at £53 million is £37 million higher than the market consensus of £16 million for Infrastructure Investments profit on disposal in 2017. The year end net cash, which was forecast to be in line with prior year, is now expected to be around £103 million higher.
In addition, Balfour Beatty has entered into a series of arrangements with funds managed by Equitix Investment Management Limited and Dalmore under which up to an additional 12.5 percent interest in Connect Plus may be sold by Balfour Beatty at an equivalent price. These arrangements lapse on 13 May 2018 and are subject to a number of conditions. Therefore there is no certainty that there will be any subsequent transaction.
For the year ended 31 December 2016, Investments in Joint Venture & Associates in relation to the Group’s 12.5 percent interest in Connect Plus was £78 million¹ and it contributed profit before tax of £8 million to the Group’s results. The Group continues to hold a 27.5 percent stake in Connect Plus.
Leo Quinn, Group Chief Executive, said: “This transaction emphasises the ongoing attractiveness of our infrastructure assets and is in line with our declared intent to maximise value for shareholders.”
Additional
Further to the announcement, Balfour Beatty announces the sale of an additional 7.5 percent stake in Connect Plus, the company which operates the M25 orbital motorway.
The Group has an unconditional right to sell the stake to funds managed by Dalmore Capital Limited (Dalmore). Funds managed by Equitix Investment Management Limited (Equitix) have the right to acquire this stake in priority to Dalmore for an identical price during the period to 13 March 2018.
The sale is for a cash consideration of £62 million, equivalent to the price of the earlier transaction, which is in excess of the Directors’ valuation as at 30 June 2017. The expected profit on disposal on this transaction is £32 million. The proceeds from this transaction will be used to pay down borrowings in 2018.
As a result of the sale of 12.5 percent of Connect Plus, announced on 21 December 2017, and this transaction, the Board’s expectations for both Group profit before tax and year end net cash in 2017 are above those included in the Balfour Beatty Trading Update on 12 December 2017.
Taking account of both transactions, the expected 2017 Infrastructure Investments profit on disposal is now £85 million. The year-end net cash, which was originally forecast to be in line with prior year, is still expected to be around £103 million higher since the proceeds from the sale of the 7.5 percent tranche will not be received until 2018.
Arrangements with funds managed by Equitix and Dalmore covering the potential disposal of an additional 5 percent interest in Connect Plus remain in place. These arrangements lapse on 13 May 2018 and are subject to a number of conditions. Therefore there is no certainty that there will be any subsequent transaction.
For the year ended 31 December 2016, Investments in Joint Venture & Associates in relation to the Group’s 7.5 percent interest in Connect Plus was £47 million1 and it contributed profit before tax of £5 million to the Group’s results. The Group continues to hold a 20 percent stake in Connect Plus.
