Full steam ahead for Forth Ports shares after Peel-led bid

Published on Monday 8 March 2010 20:24

SHARES in Forth Ports sailed 25 per cent higher last night as analysts predicted that the consortium circling the group would have to raise its offer by about £70 million in order to woo shareholders.

• Picture: TSPL

Edinburgh-based Forth Ports revealed after the market closed on Friday that it had rejected two approaches from Northstream, a consortium led by transport and property firm Peel Group. After an initial offer of 1,285p a share was dismissed, the consortium upped its bid to 1,340p, which valued Forth Ports at about 612m.

The group – which owns seven ports and a property portfolio including Edinburgh's Ocean Terminal shopping centre – said: "The board is of the unanimous view that these proposals fall far short of the value of Forth Ports".

Forth Ports' shares last night closed up 286p at 1,403p, as analysts said the offer would have to be raised to 1,500p.

Dominic Edridge, an analyst at UBS, said: "Although there are few true comparable companies and historical transactions are somewhat redundant given they were done in a much easier debt environment, we believe that an offer of at least 15 would be needed to make a deal succeed."

A bid at 15 a share would value Forth Ports at about 685m.

The board of Forth Ports said it would meet with Northstream – which also includes Deutsche Bank's Rreef infrastructure fund and Arcus, the infrastructure arm spun out from Australian investment firm Babcock & Brown – but only after the group's annual results are published on 22 March.

The Northstream consortium already holds a 27.4 per cent stake in the group and the Forth Ports board said it would meet Northstream in its role as an existing investor in the business.

Peel, led by billionaire John Whittaker, already owns Clydeport, which consists of the ports at Hunterston, Greenock, King George V Dock and Ardrossan, and is running the Glasgow Harbour development.

Outside Scotland, the Manchester-based group owns the Mersey Docks & Harbour Company and the Manchester Shipping Canal.

Peel also owns Liverpool John Lennon airport, City airport Manchester and Robin Hood airport Doncaster Sheffield, as well as a majority stake in Durham Tees Valley airport.

As well as port facilities at Leith, Rosyth, Grangemouth, Dundee, Methil, Burntisland, and Tilbury, near London, Forth Ports has plans to redevelop land along Edinburgh's waterfront.

Projects are planned at Leith Docks and the Western and Granton harbour areas, while the company's shopping centre at Ocean Terminal is expected to receive a boost when Edinburgh's tram line reaches the arcade.

Ahead of the publication of Forth Ports' results for the year to 31 December, UBS holds a "neutral" rating on the stock, with a target price of 1,150p.

Edridge added: "Valuing Forth Ports is a complex matter, given there are two very distinct businesses: the port operations on the Firth of Forth in Scotland and the land bank at Leith that will be turned into a mixed use property development over the course of the next decade."