Why Balfour Beatty went sour on a deal not sweet enough
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Version 0 of 1. Call that a sweetener? Carillion's attempt to entice Balfour Beatty back to the negotiating table was short on sugar. The basic terms were left unchanged but Balfour's shareholders would have been allowed to keep a final dividend, an adjustment worth only a few pennies. On the real bone of contention – should Parsons Brinckerhoff, Balfour's US-based design consultancy, be sold? Carillion stuck to its guns and argued for retention. Its only concession was that it would pay the bidding costs for the would-be purchasers it wants to disappoint. No surprise, then, that Balfour chairman Steve Marshall rejected the new approach. He and his colleagues are wedded to selling Parsons for the sake of firm proceeds today; a late change of strategy would be disruptive in a people-based business, they argue; and interested parties might disappear if asked to dance to Carillion's conditional tune. The Carillion view is that Parsons is one of the best pieces of Balfour and its earnings would come in handy – not necessarily for ever, but certainly during the upheaval of merging two companies with combined revenues of almost £14bn. Both positions are respectable but they are irreconcilable. This deal looks dead in its current form. Resuscitation could only happen in two ways. Carillion could go hostile but that looks unlikely because cost savings (£100m-plus in the UK, say analysts) are easier to achieve on a friendly basis. Alternatively, Balfour investors could try to bully the company back into talks. But there's no sign of rebellion in the ranks. Maybe the fund managers are all on holiday. More likely, they take the pragmatic view that, even if Carillion now walks away, another bidder will turn up sooner or later if the Marshall plan to "simplify and refocus" Balfour doesn't produce quick results. What is clear is that Balfour needs a shot of something. First half pre-tax profits were just £22m on revenues of £4bn. Construction has always been a low-profit margin game but that's anaemic. |