Balfour Beatty to Sell Facility-Managment Division to GDF

Balfour Beatty, Britain’s largest construction group, will sell its U.K. facility-management business to GDF Suez SA (GSZ) for about 190 million pounds ($295 million) to focus on the infrastructure industry.

The sale to the French energy company is expected to be completed by the end of this year, and Balfour Beatty will use the proceeds first to reduce debt and eventually to fund new investments, the London-based builder said today in a statement. Any spending is likely to be outside the U.K. as the company wants to grow particularly in the U.S., Canada and South America, Chief Executive Officer Andrew McNaughton said.

“If you listen to all the noise in the market, the United States as a sleeping giant is beginning to rub its eyes” as it wakes up, McNaughton said today in a phone interview. “We’ve done a lot of work in the last 18 months to position ourselves well for when that market recovers.”

The U.S. accounted for 36 percent of Balfour Beatty (BBY)’s revenue last year, and the company wants to expand further in that market, McNaughton said. The company is the preferred bidder for a 330 million-pound contract with the University of West Florida for a mixed-use development, the builder’s eighth student-accommodation project in the U.S., it said on Aug. 5.

“Given the potential level of infrastructure spending in the U.K. in the medium term,” a shift of work away from the country “is to be expected,” said Olivia Peters, an analyst at RBC Capital Markets. “You’re looking at a pick-up in activity by about 2017, so companies have to find some growth before that.” Peters has a sector perform recommendation on the stock with a price estimate of 200 pence.

Stock Declines

Balfour Beatty fell as much as 1 percent to 241.5 pence and was trading down 0.4 percent at 2:23 p.m. in London. The stock has dropped 11 percent this year, valuing the company at 1.67 billion pounds.

The facilities-management unit, which operates under the Balfour Beatty WorkPlace brand, has a workforce exceeding 9,000 employees and generated 482 million pounds of revenue in 2012, the company said today. The sales figure amounts to about 5 percent of group revenue last year.

GDF Suez plans to continue serving Balfour Beatty WorkPlace’s customers among U.K. state agencies and government contractors, including the Department for Work and Pensions and the U.K. company’s Romec joint venture with Royal Mail Group, the Paris-based utility said in a separate statement.

A review of the facility-management unit led to the conclusion that “we’re probably not the best parent for that business to develop going forward,” McNaughton said. Balfour Beatty’s focus will now be to develop infrastructure on a “more international basis.”

Balfour Beatty’s ownership of Blackpool airport in England is “not the largest consideration” for the building company, McNaughton said. “When you actually look at the fact that now we’ve not only exited Exeter airport but we’ve sold our airports management business, you’d have to say that it becomes more marginalized.”

To contact the reporter on this story: Eshe Nelson in London at enelson32@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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