LONDON--Balfour Beatty PLC (BBY.LN) has received a one billion pound ($1.56 billion) bid for its portfolio of infrastructure investments, leaving the company mulling whether to sell a core division and focus on reviving the fortunes of its construction business.

John Laing Infrastructure Fund Ltd (JLIF.LN) Monday said it made a "non-binding proposal" to buy Balfour's public-private partnership assets for "approximately GBP1 billion in cash," to be financed via a share issue. The portfolio of hospitals, schools, transport infrastructure and housing projects was valued by Balfour at GBP1.05 billion in June.

Shares in Balfour rose 4% after the announcement, trading eight pence higher at 191 pence at 1330 GMT. Balfour said it will consider the proposal, adding that it "remains open to value creation opportunities across the group."

The approach comes as Balfour is awaiting the arrival of new Chief Executive Leo Quinn and the findings of an external audit of its loss-making U.K. construction arm. Shares in the company have lost over a third of their value this year, leaving it with a market capitalization of GBP1.32 billion. The infrastructure arm has been a reliable source of cash for Balfour since it began selling assets on a piecemeal basis in 2011.

Citi analyst Neil Dawson called the offer "a clear positive," affirming Balfour's valuation of the portfolio.

"Ultimately Balfour's current strategy is to liquidate PPP assets over time, so realising the whole portfolio may be attractive," he wrote, adding that the proceeds could help Balfour fund a GBP200 million share buyback planned for next year.

Alastair Stewart, an analyst at Westhouse Securities, called the proposal "a conundrum" for Balfour. The GBP1 billion offer is a "low bid" tabled opportunistically by JLIF in the hope of appealing to disenchanted Balfour Beatty shareholders who have been left frustrated by the summer's failed merger with Carillion PLC (CLLN), he wrote.

But if Balfour turns down the offer it could be left exposed to any more unexpected "cash bleed" uncovered by KPMG's review of the U.K. construction business.

"This could be addressed by piecemeal PFI [private finance initatives] disposals, but we do not rule out the risk of an equity raise at some point," Mr. Stewart wrote.

The market value of in JLIF has risen to almost a billion pounds from GBP270 million when it floated in London in 2010. Shares dropped three pence, or 2%, on Monday to trade at 121 pence.

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