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Majors capitalizing on PFI know-how


SUCH is the City's enthusiasm for PFI these days it seems that even the companies themselves are struggling to keep track of what they might be worth.

Last week John Laing's board recommended a 385p a share offer for the group from the German insurance group Allianz worth £957.5 million in total. An earlier recommendation for an offer from fund manager Henderson Group worth 355p a share was withdrawn.

Even now, with Laing's shares at 393p, the stock market is sensing that Henderson or perhaps another party might come back with a higher bid.

The Henderson bid was reckoned to be generous and the new offer is worth almost 40 per cent more than Laing's stock market value before the first bid.

Laing has an attractive portfolio of some 50 PFI/PPP projects, which, using a relatively generous method, the company valued at £420 million last August. This is a long way from the near-£960 million that Allianz is offering and underlines how the fashion for infrastructure assets, which offer long-term cash f lows to match financ ial institutions' long-term liabilities, has driven up values.

But it also highlights the value which investors now put on the goodwill and bidding know-how that has been built up in specialist PFI groups. This bodes well for share prices elsewhere in the sector and should be positive for other major contractors such as Carillion - which hosted a tour of its successful PFI contract at the John Radcliffe Hospital in Oxford last week - and Balfour Beatty. Mediumsized contractors with PFI interests such as Galliford Try and Kier Group should also benefit, as well as those with PFI assets for sale, notably Amec.

It is also perhaps no surprise that the new bid for Laing has come from a German-based company. The federal republic is seen as one of the most promising markets for PFI, where British contractors can take advantage of their experience at home to carve out new markets.