British infrastructure company Balfour Beatty has rejected a second merger proposal from rival Carillion, saying it would pose significant risks to its business. Loss-making Balfour Beatty said yesterday there was no strategic logic to a combination other than to enhance the combined group's earnings, and the risks were significant.
Balfour has construction, engineering and facilities management services in more than 80 countries. A tie-up would expand Carillion’s international business and add breadth to its construction activities.
Carillion's approach, made public on July 24th, followed a difficult 18 months for Balfour, which has issued a series of profit warnings and lost its chief executive in May. Balfour broke off the talks a week after they emerged because Carillion insisted that Balfour cancel the planned sale of its US unit Parsons Brinckerhoff and keep it in the merged company.
Carillion’s revised proposal included a final dividend payment for Balfour shareholders and the covering of “appropriate costs” for Parsons Brinckerhoff bidders. Carillion also wants a deadline extension until August 28th to make a formal bid.
"In our board's judgment, it wasn't a credible proposal that was going to fix all the risks for Balfour Beatty shareholders," Balfour executive chairman Steve Marshall told reporters. "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," he said.
Carillion said it would consider its position and make a statement in due course.
The companies have not disclosed financial terms of Carillion’s proposal. They have a combined market capitalisation of £3 billion.
Meanwhile, Balfour brought forward interim results for the half year to June 27th, which showed underlying pre-tax profits falling by 53 per cent to £22 million. It said the results were in line with its latest trading update when it warned of a shortfall in its UK construction arm.
The company is still looking for a new chief executive after the departure of Andrew McNaughton earlier this year in the wake of a profits warning. – (Reuters /PA)
