Carillion gives up on Balfour Beatty merger

Contractor takes a step back after its final approach is rebuffed

NEWS, Business, Al Futtaim Carilion, Balfour Beatty, Carillion, Carillion Alawi, Dutco balfour beatty

Carillion has admitted defeat on the prospects of a merger with fellow UK contractor Balfour Beatty.

Despite being the smaller of the two businesses, Carillion began pursuing a deal last month which was initially welcomed by Balfour Beatty.

However, when Carillion then insisted that the US-based engineering consultancy Parsons Brinckerhoff (which is currently up for sale) remained part of the deal Balfour Beatty decided to reject its offer.

Carillion subsequently attempted to improve the terms of the all-share offer earlier this week, increasing the amount of shares granted to Balfour Beatty and offering a one-off divident which valued the firm at £2.086bn ($3.47bn), compared to £1.886bn ($3.13bn) previously.

The offer was a 36% premium on the value of Balfour Beatty shares prior to the talks being revealed, and had argued that a merger could lead to cost savings of around $290mn a year.

However, Balfour Beatty rejected the offer, stating that there was no guarantee the merger would work. It also said there was a danger that a strategy of downsizing in the UK would mean it would miss out on potential recovery benefits, and that a deal would scupper the sale process for Parsons Brinckerhoff, which reports suggest are at an advanced stage with rival consultancy WSP leading the charge.

In a brief statement, Carillion said this morning that Balfour Beatty "has not agreed to Carillion's proposal or to request an extension to the Put Up or Shut Up deadline which expires at 5pm tomorrow, 21 August 2014. Carillion therefore announces that it is no longer pursuing such a merger."

Both Carillion and Balfour Beatty are active in the GCC. Carillion has a joint venture with Al Futtaim in the UAE and Saudi Arabia and trades as Carillion Alawi in Oman. Balfour Beatty has a joint venture in Dubai with Dutco.

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