Carillion has increased its offer to Balfour Beatty’s shareholders by 10.6%, as the merger saga involving the two construction giants took another twist.
The latest offer values Balfour Beatty at £2.09bn, a £200M increase on Carillion’s previous proposal.
However, Carillion remains intransigent on the future of Parsons Brinckerhoff, which it sees as integral to a merged business. Balfour is anxious to sell the engineering consultant, with WSP emerging as the new favourite this morning.
The deal would give a 58.3% share for Balfour Beatty shareholders based on the current share capital of both businesses – compared to the 56.5% share in the previous offer – and a cash dividend (or equivalent) of 8.5 pence per Balfour Beatty share (£59M in total).
But any further merger discussions would require an extension of the deadline imposed by the City of London’s Panel on Takeovers and Mergers, which required Carillion to make a firm offer for Balfour Beatty by 5:00pm on 21 August 2014. For discussions to continue, Balfour Beatty would have to request that the Panel extends this deadline.
Carillion has proposed the combined business would have a leadership team of: Richard Howson, CEO, Richard Adam, CFO, and Philip Green, chairman (all from Carillion), with three Balfour Beatty non-executive directors to join the board. The senior management team below board level would be drawn from both companies.
Regarding Parsons Brinckerhoff, Carillion said it “has repeated to Balfour Beatty that it is willing to allow it to continue with its Parsons Brinckerhoff auction process, and to enter into a contract for a sale of Parsons Brinckerhoff subject to shareholder approval. However, should the merger proceed, Carillion would expect the disposal of Parsons Brinckerhoff not to be completed.”
It added: “Carillion is willing to reimburse the remaining Parsons Brinckerhoff bidders’ reasonable costs (up to £10M in aggregate) from the date that discussions with Balfour Beatty resume, in the event that the merger goes ahead and Parsons Brinckerhoff is not sold.”
A statement from Carillion said: “Since its announcement on 14 August 2014, Carillion has continued discussions with Balfour Beatty’s major shareholders.
“Carillion believes that the revised proposal provides a compelling case for [Balfour Beatty] to resume discussions with Carillion.”
“The board of Carillion continues to believe in the powerful strategic logic of a merger with Balfour Beatty and that, as a direct result of the merger, the cost-base of the combined group could be reduced by at least £175M per annum by the end of 2016, that earnings would be significantly enhanced from that year, and that these cost savings would represent a capitalised value of over £1.5bn.”
Philip Green, chairman of Carillion, added: “Given the scale of the prize for shareholders of both Balfour Beatty and Carillion from a merger of the two companies, the board of Carillion remains committed to moving forward in a constructive and collaborative way with Balfour Beatty to create a world-class business.”
Carillion said it would make a further announcement in due course.