Balfour rejects revised Carillion approach

Grant Prior 8 years ago
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The Balfour Beatty and Carillion merger saga has taken another series of twists.

Balfour Beatty confirmed the latest negotiations in a detailed Stock Exchange announcement on Monday morning.

Carillion came back with a revised offer last week after original talks were terminated on July 31.

But the revised deal has now also been rejected after Balfour said it had “lost confidence” in Carillion’s proposals.

The sale of Parsons Brinckerhoff is still the main sticking point along with worries over plans to scale down Balfour’s UK construction business.

The revised deal would have seen a new firm owned 56.5% by Balfour shareholders and 43.5% by Carillion

Original talks broke down after Carillion insisted that any deal was dependent on Balfour keeping Parsons Brinkerhoff.

But Carillion’s revised offer agreed to keeping the consultant in the combined business and compensating bidders currently making offers for the firm.

Balfour said it was rejecting the revised offer because:

·      The risk of undermining the Parsons Brinckerhoff sales process which is a key strategic objective of the Group

·      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

·      Risk that a failed sale process would materially impact the motivation and retention of Parsons Brinckerhoff management and employees and damage its competitive position in a rapidly consolidating professional services market

·      Impact of terminating the Parsons Brinckerhoff sale process would be compounded if the merger with Carillion did not complete, in which case any associated loss of value would be entirely for the account of Balfour Beatty’s shareholders

·      Significant execution risk associated with the integration of the two businesses would be substantially increased by any material revenue reduction in Balfour Beatty’s Construction Services UK business

·      Any material reduction in Balfour Beatty’s revenues in Construction Services UK would create unacceptable operational and financial risks:

–    Increase restructuring costs and cash and working capital outflows

–    Reduce the addressable cost base and bankable synergies

–    Remove profitable business opportunities, taking away future earnings recovery potential

·      The risk of engaging in detailed due diligence with a competitor while having serious reservations about the transaction and its deliverability

Balfour added: “In light of these considerations on the revised proposal, the Board 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 this morning Carillion said: “The Board of Carillion 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.”

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