An infrastructure sector which has been pretty depressed of late is being given some new life as a bid emerges for John Laing Infrastructure (JLIF).
The fund is considering a 142.5p per share cash offer from Dalmore Capital and Equitix Investment Management - which would also include the payment of a 3.57p dividend upon the closing of the transaction. Its shares are up 17.7% to 139.1p.
The transaction has not been recommended by the JLIF board yet, but the language of the statement suggests this could be a matter of time.
Other infrastructure funds were also in demand on the news with International Public Partnerships (INPP) and HICL Infrastructure (HICL) gaining 5.5% to 150.2p and 4.8% to 151.6p respectively.
In this article published in May, we explored if infrastructure would come back into favour after a tricky spell, partly driven by private investment in big public projects becoming a political hot potato following the collapse of outsourcer Carillion.
WHAT DOES THIS POTENTIAL DEAL SAY ABOUT THE INFRASTRUCTURE SPACE?
AJ Bell investment director Russ Mould says: ‘The infrastructure space has been popular with investors as an alternative asset class offering a long-term and, in theory, predictable source of income.
‘Political threats, failed IPOs and an increasingly competitive market have recently the sheen off infrastructure funds and seen them fall out of favour.
‘The risk that a potential Labour government might crack down on private involvement in big public projects, particularly after the failure of outsourcer Carillion earlier this year, is perhaps the biggest negative factor.’
Mould adds: ‘However, the revelation of takeover interest for John Laing Infrastructure Fund is helping to revive some interest in the sector, with counterparts International Public Partnerships and HICL Infrastructure also in demand on the stock market.
‘Nonetheless, some evidence of the reduced standing of infrastructure as an asset class is provided by the relatively skinny premium to net asset value of less than 20% implied by the offer. Most investors tend to demand at least 20% bid premium in order to accept a takeover.'
