Forth bids spark expectations

Forth Ports has staved off two take-over bids from a consortium that includes local competitor Peel and Arcus IP, a Babcock & Brown Infrastructure spin off. In its rejection statement, Forth said the proposals “fall far short of the value”. However, the market movement may be the precursor of a better, third bid.

The consortium, Northstream, already holds a large slice of the UK business. While the bulk of the slice is held by Arcus Infrastructure Partners, a management buy-out of part of B&B’s European infrastructure business which is doubtless looking to capitalise on its existing 23.5% share, there is another attraction for Peel, who has a 3.5% stake.

Peel presently owns Mersey Docks, the Port of Liverpool, the Manchester Ship Canal, Clydeport and the Medway ports. Most of these, with the exception of the Medway facilities, are on the west of the UK, facing the US market, while six out of seven of Forth Port’s are on the east coast of Scotland, clustered around Dundee, Grangemouth and Leith in Edinburgh, all with access to Europe. This makes the acquisition a good fit for Peel, with the most obvious overlap being mainly those facilities close to London: Forth’s Tilbury and Peel’s Medway ports.

The last partner is RREEF, the infrastructure arm of Deutsche Bank Asset Management, which holds a further 0.5% of Forth Ports.

Northstream said that it had made an approach at £12.85 a share on January 28 and gone back to Forth’s board on February 11 at £13.40, a 28% premium to the shares’ price then which would have valued Forth Ports at about £612m. It said it approached Forth on March 1, saying it was prepared to raise its offer before Forth issues full-year results on March 22 but only if given access to Forth’s books.

Forth Ports pointed out that it’s facilities “generate an income stream with a high level of predictability and have strong organic growth prospects”.

It went on to say that “Forth Ports has a number of other valuable assets, including a 33% shareholding in Tilbury Container Services, a substantial property portfolio and a number of renewable energy projects,” adding that it believes that the portfolio has the potential to appreciate greatly in value when property markets recover.

Further, Forth thinks that its renewable energy projects “will generate significant value in future years”. This is likely the case, as the port business will also benefit from the cargo throughput that will come about from feeding the green energy plants.

Forth said it was prepared to talk to consortium members in their role as shareholders, but only following publication of the preliminary results for the financial year.