Important distinctions exist between the direct and indirect sale of PPP equity. The sale of equity by SPC shareholders is classified as a direct equity transaction. Equity may be sold to other shareholders in the company either by agreement or through the exercise of pre-emptions rights, to other financial institutions or to secondary market funds such as infrastructure funds. In some cases equity may be sold to a joint venture established between the PPP contractor and a bank or pension fund.
When a PPP contractor sells equity to a listed infrastructure fund bearing the same company's name it is also regarded as a direct financial equity transaction. PPP companies often have a minority 19.9% stake in listed infrastructure funds where the majority of shareholders are global institutional shareholders. This is clearly a change of equity ownership.
Secondary market funds have been subject to takeover or merger on 17 occasions - see Appendix 3. In these cases, the equity in a package of PPP projects is acquired for a lump sum. The value of the equity of each project is assumed or hidden within the total price paid. There is a change in the ownership equity, but it is classified as an indirect equity transaction.
In the event of a takeover or merger, the value of PPP project shareholdings is included in the overall value of the company and cost of the takeover and is also classified as an indirect transaction. For example, the 2006 takeover of John Laing plc by Henderson Global Investors, led to a change in equity ownership in 52 PFI projects.
Takeover of John Laing plc by Henderson Global Investors in 2006 (PPP project and percentage of equity owned by Laing) |
Norwich & Norfolk Hospital (20.0), Queen Elizabeth Hospital Greenwich (50.0), North Birmingham Mental Health (100.0), Newham Hospital (50.0), Kingston Hospital (60.0), Newcastle Hospitals (40.0), Barts Hospital (12.5); Schools projects - Highland (10.0), Edinburgh (20.0), Glasgow (20.0), Newham (80.0), Enfield (80.0), North Swindon (100.0) and South Lanarkshire (33.3); Greater Manchester Police (50.0), Cleveland Police HQ (42.5), Avon & Somerset courts (40.0), Cleveland Firearms (50.0), Gravesend Firearms (50.0), British Transport Police (100.0), South East London Police Stations (50.0); LIFT projects (30.0) in Sandwell, Greater Nottinghamshire, Leicester, Manchester & Salford 1 and 2, South Derbyshire and North Nottinghamshire; Severn River Crossing (35.0), M40 (50.0), A56 (50.0), A130 (100.0), M6 Scotland (19.5), Sirhowy Way (50.0); Walsall (100.0), Manchester (50.0) and Wakefield (50.0) Street Lighting; Newham Housing (50.0) and Bentilee Regeneration (50.0); |
Source: John Laing Annual Report 2006.
Note: Ownership of many of these projects changed again when John Laing/Henderson established the John Laing Infrastructure Fund in which John Laing/Henderson had a 18.2% equity stake at December 2011.
A smaller number of changes in PPP equity ownership occurred following the takeover of construction companies Mowlem plc and Alfred McAlpine in 2006/07 by Carillion plc, street lighting contractor David Webster by Bouygues in 2005, and after ACS (Spain) gained majority ownership of Hochtief (Germany) in 2011.