StockMarketWire.com - Balfour Beatty has raised its pre-tax profit forecast after agreeing to sell a 12.5% stake in Connect Plus, the company which operates the M25 orbital motorway.

Balfour Beatty has agreed to sell the stake to funds managed by Dalmore Capital for £103m in cash which, it said, was in excess of the directors' valuation at the end of June.

The sale, which is subject to Highways England consent, is expected to complete before year end.

It said the proceeds would be used to pay down borrowings in 2018.

It said that as a result of this transaction, the board's expectations for both group pre-tax profit and year end net cash in 2017 were higher than those included in the trading update on 12 Dec.

It said: 'The expected profit on disposal on this transaction at £53 million is £37 million higher than the market consensus of £16 million for Infrastructure Investments profit on disposal in 2017.

'The year end net cash, which was forecast to be in line with prior year, is now expected to be around £103 million higher.'

Balfour Beatty said it had also entered into a series of arrangements with funds managed by Equitix Investment Management and Dalmore under which up to an additional 12.5% interest in Connect Plus may be sold by Balfour Beatty at an equivalent price.

It said: 'These arrangements lapse on 13 May 2018 and are subject to a number of conditions.

'Therefore there is no certainty that there will be any subsequent transaction.'

For the year ended 31 December 2016, Investments in Joint Venture & Associates in relation to the Group's 12.5 percent interest in Connect Plus was £78 million and it contributed profit before tax of £8 million to the Group's results.

The group continues to hold a 27.5 percent stake in Connect Plus.

Group chief executive Leo Quinn said: 'This transaction emphasises the ongoing attractiveness of our infrastructure assets and is in line with our declared intent to maximise value for shareholders.'

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