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Balfour Beatty offloads FM arm for £190m

Balfour Beatty has announced the sale of its FM arm to GDF Suez Energy Services in a deal expected to be worth around £150m in net cash.

Completion of the sale is expected in the fourth quarter of 2013 and is conditional on EU competition clearance. Net cash inflow upon completion is expected to be in excess of £150m.

Following the announcement, analysts Numis Securities have reduced their profit before tax estimates for the contractor from £200m to £193m in 2013, and from £257m to £239m in 2014.

Balfour Beatty confirmed it was exploring options for WorkPlace in February after the Financial Times reported it was for sale for £250m.

Despite the sale coming in at £190m, Chris Millington at Numis said the figure was “broadly in line with estimates”.

It is the latest sale for the contractor after it disposed of a 50 per cent stake in Salford hospital PFI for £22m in July and its Exeter Airport stake in June to Patriot Aerospace, the aviation branch of Rigby Group.

In May, the firm announced the sale of its 50 per cent interests in four PFI schools projects in Birmingham, Bassetlaw, Stoke and Rotherham to its co-shareholder, Innisfree, for combined proceeds of £42.5m, generating a gain on disposal of £24.4m.

Balfour Beatty has also completed the sale of its 50 per cent interest in the Tameside Hospital PFI to a subsidiary of HICL Infrastructure Company Ltd, its co-shareholder, for £16m, generating a gain on disposal of £9m.

This followed its £50m profit warning in April, the second in six months, which led to regional office closures and the appointment of Nick Pollard to the UK Construction Services chief executive role.

The proceeds of the transaction will be used in the first instance to reduce borrowings, and over time, to fund investments consistent with Balfour Beatty’s strategy.

The cash consideration will be reduced by net debt transferring with the business and may be subject to adjustments based on completion accounts and in relation to pension liabilities.

Balfour Beatty chief executive Andrew McNaughton said: “The sale of the UK FM business represents an important step in our evolution as we intensify our focus on infrastructure. 

“In addition to finding a good new home for the business, its customers and employees, this transaction has achieved good value and will enable us to allocate more resource to target growth sectors and markets in the future.”

Balfour Beatty WorkPlace works in outsourced integrated services and total facilities management with capabilities including facilities management, business process outsourcing and energy services.

The business has a number of major contracts in the UK with clients including the Department for Work and Pensions, HM Revenue & Customs and North East Lincolnshire Council as well as the Romec joint venture with the Royal Mail Group, which provides technical and building services to Royal Mail, Post Office and Parcelforce Worldwide.

It is expected to continue to provide facilities management services to Balfour Beatty’s current portfolio of social infrastructure PPP assets in the UK and to collaborate with the group on the development of its investments in the future.

The UK FM business, the performance of which is reported within the group’s support services segment, generated £482m of revenue in 2012 with operating profit of £21m, and has more than 9,000 employees. Gross assets at 31 December 2012 were £197m.

Citigroup Global Markets Ltd is acting as financial adviser to Balfour Beatty.

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