Balfour Beatty rejects fresh Carillion approach
Contractor points to 'significant execution risk' of completing merger
Balfour Beatty has rejected a fresh approach by Carillion to revive a proposed $5bn merger between the two parties.
The company said that following its rejection of an initial deal, which broke down when Carillion insisted it would only pursue a merger if Balfour Beatty halted the sale of Parsons Brinckerhoff, Carillion had put a revised offer to the firm.
Carillion's initial plan was a merger which would have seen 56.5% of shares in the combined body going to Balfour Beatty shareholders (as the larger of the two businesses), an agreement that Balfour Beatty could continue to sell Parsons Brinckerhoff and three of the ten roles on a combined board going to Balfour Beatty directors, including that of chairman, but not CEO or CFO.
These terms were agreed, and an announcement was made to the stockmarket on 24 July.
Balfour Beatty then said a revised offer included an insistence that Parsons Brinckerhoff remained part of the combined business, but a belief that greater synergies could be achieved than the initial $420mn anticipated.
Attempts were made to bring Balfour Beatty back to the table, but the firm set out its reasons for rejecting the offer in a statment today.
It argued in pursuing the deal, there were "a number of significant risks, many of which cannot be mitigated".
These included a potentially failed sale process for Parsons Brinckerhoff, which would weaken Balfour Beatty's position of the Carillion deal did not complete.
There would also be a danger that Parsons Brinckerhoff staff would leave if no sale was agreed, and that there would be a "significant execution risk" in combining the Carillion's and Balfour Beatty's operations.
"In light of these considerations on the revised proposal, the Board has lost confidence in the likely delivery of a successful transaction and has therefore concluded that the current proposal from Carillion is not in the best interests of Balfour Beatty shareholders.
"With the Parsons Brinckerhoff sale process proceeding in line with the Board's expectations, the Board is clear that its current plans to refocus and simplify the Group, including the sale of Parsons Brinckerhoff, remains the most attractive option."
Balfour Beatty and Carillion had announced on 24 July that they were in talks about a potential tie-up.
However, Balfour Beatty walked away from the deal a week later over Carillion's insistence that Parsons Brinckerhoff should be retained. It had said a sale process was well advanced, with reports suggesting that Atkins and WSP are vying with private equity bidders for the unit.
Under UK stockmarket rules, Carillion now has until 21 August either to make a revised bid for Balfour Beatty, or to walk away from the deal.
Both firms have a strong presence in the GCC, with Carillion operating a joint venture with Al Futtaim in the UAE and the Carillion Alawi arm in Oman. Balfour Beatty, meanwhile, has a joint venture in Dubai with Dutco which is currently working on the expansion of the Dubai Mall project for Emaar Properties, and Parsons Brinckerhoff is joint project manager of the $7bn Saudi Landbridge project.