The non-binding offer equates to more than three quarters of the market capitalisation of Balfour Beatty, which also has construction and support services businesses, and boosted Balfour's shares on Monday to their highest since September.

At 1050 GMT, the stock was up 4.4 percent at 191.4 pence, the biggest rise by a UK mid-map stock.

Shares in John Laing Infrastructure Fund (JLIF), which said it would fund the cash offer by issuing shares, were down 2.2 percent at 120.6 pence.

A source close to Balfour Beatty said the company was yet to receive any offer from JLIF.

Public-private partnership (PPP) deals can be attractive to infrastructure companies because of their steady income steams.

In August, Balfour increased the valuation of its PPP portfolio by 46 percent to 1.05 billion pounds, in part reflecting Britain's economic recovery.

Liberum analysts said that was still a conservative valuation, and that JLIF's offer was thus not very generous.

"While the Laing offer looks low, it does highlight the significant value of the business," they added.

The offer from JLIF, one of Europe's largest listed infrastructure funds, comes after a troubled couple of years for Balfour, during which it has issued a string of profit warnings and fended off takeover approaches from rival Carillion.

Balfour has appointed turnaround specialist Leo Quinn from defence firm Qinetiq as its new chief executive, tasked with leading a strategic review of the group when he joins on Jan. 1.

Separately on Monday, Kier Group said it had held talks about buying rival Mouchel, a group that helps manage infrastructure including motorways in Britain and roads in Western Australia.

(Editing by Kate Holton and Mark Potter)

By Paul Sandle