The US buyout group KKR has agreed to take one of the UK’s leading private sector infrastructure investors, in the latest example of US companies targeting relatively cheap UK listed companies.
The Â£ 2 billion ($ 2.8 billion) deal for
John Laing Group
places a higher value on the company than its market capitalization has consistently achieved in over six years of public ownership. John Laing shares climbed more than 11% on Wednesday in London, while
the stock was 1.4% lower in pre-market trading in New York.
The comeback story. John Laing went public in February 2015 and is part of the midcap
index. The group has assets in Europe, North America, Latin America and Australia, with more than 150 investments covering sectors such as transport and energy transition. In April, the company agreed to acquire two regional telecommunications companies in Germany, as part of a campaign to develop high-speed internet in the country.
Earlier this month, shares of John Laing jumped about 25%, after the company confirmed it was in buyout talks with KKR. The American private equity giant – a very active player in the buyout during the Covid-19 pandemic – already has an interest in infrastructure with more than 40 investments worldwide.
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What’s up. John Laing said on Wednesday his board had accepted a cash takeover offer from KKR valuing the company at Â£ 2 billion. Under the terms of the deal, each John Laing shareholder would receive 403 pence ($ 5.7) per share – a 27% premium to the share price before buyout talks were confirmed.
Since John Laing’s IPO in 2015, the stock has historically traded below the price offered by KKR to buy the company. Only twice the stock has seen monthly highs above 400 pence a share, with an all-time high of 403.4 pence.
âJohn Laing has a strong market position and over 40 years of experience in delivering large infrastructure projects,â said Tara Davies, Co-Head of European Infrastructure at KKR. “There is a growing global demand for national infrastructure that provides societal benefits and reflects technological advancements and policy priorities in areas such as connectivity, renewable energy and transport.”
KKR has agreed to partner with infrastructure investor Equitix to jointly own the John Laing portfolio. Following the completion of the takeover, Equitix will control 50% of its assets, which will continue to be managed by the current management team of the company.
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Look forward. The deal remains subject to a 75% majority vote at a meeting of John Laing shareholders, as well as customary regulatory approvals. Shareholders are likely to agree to the repurchase – as they should – given the attractive premium KKR places on the stock. While John Laing’s shares have risen more than 20% so far this year, the takeover would now provide liquidity at a price the stock has only rarely seen before.
KKR’s takeover of John Laing is just the latest move by US players in the takeover of London-listed companies – although it is also a smart buy, with infrastructure groups set to benefit from further rounds of government spending.
British companies remain relatively cheap compared to their American counterparts, after years of concerns over Brexit and more recently the Covid-19 pandemic. The FTSE 250 only broke its pre-pandemic peak in April and remains a possible recovery game for investors.