Construction: Balfour Beatty rejects further approach over merger with Carillion
08:57 20 August 2014
Balfour Beatty today rejected a last-ditch attempt by Carillion to keep alive the prospect of a £3billion merger, a day before the deadline for any deal expires.
Shares in Balfour Beatty fell nearly 6% in early trading after the infrastructure services company said it had considered the latest offer and consulted with major shareholders but found it failed to address key issues. Carillion shares also fell, by 2%.
The issues include disagreement over the future of Balfour’s US business Parsons Brinckerhoff, which it is trying to sell.
The firm also said the new terms were only a “small value change” compared to the previous proposal, casting doubt on Carillion’s calculations about how much the deal would be worth to Balfour investors.
“The board has unanimously concluded that the proposal is not in the best interests of its shareholders and has decided to reject the proposal,” the company said.
It said it would not be seeking an extension to the “put up or shut up” deadline under takeover rules that expires tomorrow at 5pm.
The rejection comes a day after Carillion made a sweetened offer which it indicated valued Balfour at £200million more than it had done before, urging the company to re-open talks and extend the time limit.
Chairman Philip Green highlighted “the scale of the prize for shareholders” of both companies from a merger.
Wolverhampton-based Carillion claims a merger could yield £175m a year in cost savings though Balfour has previously cast doubt on this figure.
Balfour’s rejection also called into question the way its suitor had calculated the increase in value of the all-share offer, which would also see shareholders receive a £59m dividend pay-out. It said the new proposal only amounted to a £55m improvement on the last.
Balfour, whose presence in the East of England includes bases in Ipswich, Colchester, Chelmsford and Swaffham, also again voiced concern about the business plan which it said would significantly reduce the scale of its UK construction business at a time “when it is poised to benefit from a recovery in the market”.
A key stumbling block for the merger has been Balfour’s sale of Parsons Brinckerhoff, which Carillion says should not go through in the event of a tie-up. It has offered to cover bidders’ reasonable costs of up to £10m.
But Balfour said the sale was “reaching a successful conclusion” at an attractive value which would return up to £200m to its shareholders.
It said it would “continue to be focused on delivering its standalone strategy” as set out in its interim results last week.
The results showed a 53% slump in half-year profits. Balfour is still looking for a new chief executive after the departure of Andrew McNaughton earlier this year following a profit warning.