Balfour Beatty rejects revised merger offer from Carillion

UK construction firm Balfour Beatty has rejected a revised merger offer from Wolverhampton’s Carillion claiming the deal poses a risk to the business and fails to accept compromise over the sale of a consultancy subsidiary.

Carillion yesterday upped its offer to its rival in a last ditch attempt to persuade the board to accept the terms of a merger which would create a £3bn business.

The Wolverhampton-based group said it had held additional talks with Balfour Beatty shareholders after which it had tabled the revised offer.

The deal proposed an all-share merger of Carillion and Balfour Beatty, with a 58.268% share for Balfour Beatty shareholders based on the current share capital of each company.

In addition to the interim dividend announced by Balfour Beatty last week and to the 2014 final dividend to which shareholders of the combined group would be entitled, Balfour Beatty shareholders would receive an additional cash dividend or equivalent of 8.5p per Balfour Beatty share, a move worth around £59m.

The newly-merged business would have a leadership team comprising Richard Howson, CEO; Richard Adam, CFO; and Philip Green, Chairman. Three Balfour Beatty non-executive directors would also join the new board.

The senior management team below board level would be drawn from both companies.
On the issue of the sale of the Parsons Brinckerhoff subsidiary, Carillion said it would cover the bidders’ reasonable costs in the event of the merger going ahead – up to £10m in aggregate.

The improved offer represented a premium of 36% to Balfour Beatty’s average price prior to July 24, the day news of the proposed merger first broke.

However, in a statement today rejecting the offer, Balfour Beatty said the revised proposal again failed to address key concerns.

These being the “considerable risks” associated with the proposed business plan, including the strategy to significantly reduce the scale of the UK Construction business just as it is poised to benefit from a recovery in the market; and the continued intention to terminate the sale of Parsons Brinckerhoff.

The BB board said its intention was to conclude the sale of Parsons Brinckerhoff and in the process return up to £200m to shareholders; recruit a new CEO; seek the restoration of value from the UK construction business including progressively returning it to peer group margins; and realise further indirect overhead savings and shared service efficiencies across the group.

It said it remained open to strategic value creating opportunities across the group while it concentrated on the restoration of value to shareholders.

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