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Balfour Beatty rejects revised Carillion merger bid

Balfour Beatty has rejected a revised proposal on a potential £3bn merger with fellow construction giant Carillion.

In a statement released this morning, the company’s board of directors stated that although they were “mindful of the synergies” that might be achieved through a combination with Carillion there are a number of significant risks – “many of which can’t be mitigated”.

For instance, the revised proposal says that Parsons Brinckerhoff should remain in a combined business, as per Carillion’s proposed change to the terms. However, Carillion would agree to cover appropriate bidder costs for the remaining bidders in the sale process.

This was an area where original talks fell through, and Balfour Beatty has reiterated that there is a significant risk of undermining the Parsons Brinckerhoff sales process, which is a key strategic objective of the Group, particularly as there “is no strategic logic for its retention other than to enhance the earnings of the combined group”.

Additionally, there are worries that bidders for Parsons Brinckerhoff may not regard the cost cover as adequate to remain fully committed to the process with the resultant risk that the sale process would be terminated.

Balfour executive chairman Steve Marshall, speaking to reporters, said: “In our board's judgment, it wasn't a credible proposal that was going to fix all the risks for Balfour Beatty shareholders.

“For example, if bidders (for Parsons Brinckerhoff) were not prepared to carry on and if the merger then didn't go through, Balfour Beatty is basically left with a failed merger transaction and damage to Parsons Brinckerhoff.”

In light of these considerations on the revised proposal, the Balfour Beatty board stated that it 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.

In response, the Board of Carillion said that it will give further consideration to its position and will make a further announcement in due course. “In the meantime, there can be no certainty that any offer will be made by Carillion or as to the terms on which any such offer might be made,” it added.

Photo shows Balfour Beatty/Carillion JV contractors on-site at Shoreditch during East London Line works in 2008. Copyright Adambro (Creative Commons)

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