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| Balfour Beatty says no to second merger approach from Carillion | Balfour Beatty says no to second merger approach from Carillion |
| (about 1 hour later) | |
| Balfour Beatty, the UK's largest construction firm, has rejected a second merger approach from its much smaller rival Carillion, saying the £3bn merger would be too risky. | Balfour Beatty, the UK's largest construction firm, has rejected a second merger approach from its much smaller rival Carillion, saying the £3bn merger would be too risky. |
| Balfour Beatty had been under pressure from Carillion to resume talks but remained unhappy with Carillion's plan that it should call off the sale of Parsons Brinckerhoff, its US design and engineering business. | Balfour Beatty had been under pressure from Carillion to resume talks but remained unhappy with Carillion's plan that it should call off the sale of Parsons Brinckerhoff, its US design and engineering business. |
| Talks between the two construction firms, which are both involved in building the east London overground train line, broke down in late July over the future of Parsons Brinckerhoff after Carillion surprised Balfour Beatty with a plan to keep the company in a combined business. | |
| Speaking after failed peacemaking talks over the weekend, Steve Marshall, executive chair of Balfour Beatty, said the proposal had been rejected for the right reasons. "The value risk to Balfour Beatty shareholders from a failed auction or from the merger proposal failing to proceed has been largely unaddressed in this revised [Carillion] proposal," he said. | |
| Balfour Beatty bought Parsons Brinckerhoff in 2009, but has never managed to get good results from the business. As well as the disagreement over Parsons Brinckerhoff, Marshall said the Balfour Beatty board also saw substantial financial and operational risks in a merger. | |
| In a separate announcement Balfour Beatty reported that pre-tax profits for the first six months of 2014 had halved to £22m, as it continues to grapple with problems in its UK mechanical and electrical business. | In a separate announcement Balfour Beatty reported that pre-tax profits for the first six months of 2014 had halved to £22m, as it continues to grapple with problems in its UK mechanical and electrical business. |
| Balfour Beatty, which operates in 80 countries and built the aquatic centre at London's Olympic Park, has been struggling since the financial crisis with a lack of work in the UK and the cancellation of major projects in Australia. The company has issued four profit warnings in two years, culminating in the ousting of chief executive Andrew McNaughton in May. | Balfour Beatty, which operates in 80 countries and built the aquatic centre at London's Olympic Park, has been struggling since the financial crisis with a lack of work in the UK and the cancellation of major projects in Australia. The company has issued four profit warnings in two years, culminating in the ousting of chief executive Andrew McNaughton in May. |
| While housebuilding has been booming over the last year, the large-scale engineering and construction projects that Balfour Beatty specialise in typically lag 18 months behind an economic recovery. | While housebuilding has been booming over the last year, the large-scale engineering and construction projects that Balfour Beatty specialise in typically lag 18 months behind an economic recovery. |
| Marshall said Balfour Beatty had started to see "a progressive ripple of recovery in our regional business" and forecast an overall improvement over the next three-to-four years. However, he indicated the firm is expecting further job losses as part of "a managed rather than a dramatic downsizing". Marshall did not give details on redundancies and Parsons Brinckerhoff is the only Balfour Beatty business currently up for sale. | |
| The company expects to complete the sale of Parsons Brinckerhoff in one to two months, while the search for a new chief executive is ongoing. The company said its order book was stable at £13bn, although the reported number was 1% down on last year as a result of the strong pound. | |
| Balfour Beatty, a FTSE 250 company, saw its share price rise 1.4% to 240 pence, following the decision to call off merger talks. | Balfour Beatty, a FTSE 250 company, saw its share price rise 1.4% to 240 pence, following the decision to call off merger talks. |
| Marshall said the board would consider any future merger proposals, as it is legally obliged to do so, but he added: "The key thing we are going to be talking about … is the future of a standalone Balfour Beatty. We are very confident the plans we have got are going to take the company forward." | |
| Under UK takeover rules, Carillion has until 21 August to renew its advances. The company said on Monday it would give further consideration to its position, adding: "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." | Under UK takeover rules, Carillion has until 21 August to renew its advances. The company said on Monday it would give further consideration to its position, adding: "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." |