£800m bid for John Laing

The impressive 11% year-on- year surge in the value of John Laing's PFI equity portfolio is reported to be the main reason behind an £800m takeover bid for the group.

The offer by Henderson, a London-based fund manager, is understood to be pitched at 340p a share. Rumours of the move prompted a 25% surge in Laing's share price last week. But it is by no means a done deal, with analysts at stockbroker Collins Stewart arguing that shares are worth 370p, which would leave the door open to a higher offer from a rival.

Laing's future was looking bleak five years ago, but by selling its construction business (in 2001) and its housebuilding operations (in 2002), the group has managed to survive.

It has focused on public infrastructure provision and has been particularly active - and successful - in PFI work.

The value of all PFI assets has soared in the past two years as a result of the emergence of a secondary PFI market, fuelled largely by money from pension funds looking for secure long-term income streams.

Laing's PFI portfolio is valued by its directors at £419m.

However, any bidder would be taking on a massive pension fund deficit of around £197m.

[Contract Journal, 20 September 2006, p 1]