Balfour Beatty calls off talks with Carillion

Balfour Beatty has called off merger talks with Carillion that would have created a £3bn UK contractor.  However Carillion said it still believed a merger made sense and was considering its position. All eyes now are on Balfour Beatty's results due out on 13 August.

A “wholly unexpected” decision by Carillion that merger talks would only go forward if Balfour Beatty did not sell Parsons Brinckerhoff  was cited by Balfour Beatty as the reason for it ending the talks. 

“The change is contrary to the basis upon which the Balfour Beatty board agreed to engage in preliminary discussions,” the Balfour Beatty statement said. “It is also contrary to the joint announcement released on 24 July 2014 which confirmed that the sale of Parsons Brinckerhoff would be unaffected by merger discussions and also a presentation to Balfour Beatty’s board by Carillion on 28 July 2014. This change in the proposed terms is not acceptable to the board of Balfour Beatty.”

The talks announced in July had been welcomed by the City and shares in both firms dropped back on the news.

Balfour Beatty is close to selecting a preferred buyer for Parsons Brinckerhoff. It is also continuing the hunt for a new chief executive. WSP and Atkins are being touted as the main bidders, according to reports. Balfour Beatty's results next week may give more insight.

Carillion said its "board is surprised by Balfour Beatty's reaction as the work to date has led to increased confidence in the potential to realise very material value for the benefit of both sets of shareholders. (We) continue to belive in the powerful strategic rationale of a combination and the capability of such a combination to create very significant shareholder value."

Parsons Brinckerhoff contributed 16% to Balfour Beatty revenue in 2013 but almost 30% of profit at £54M. But when the consultant was put up for sale by the contractor in May the company said that although PB had grown and been successful in its own right "it had not delivered any material competitive advantage for the group." (See story here). Carillion has transformed itself into a successful services business and clearly does see advantages in PB.

Meanwhile easier negotiations have been going on between Dutch consultant ARCADIS and Hyder Consulting. ARCADIS has reached agreement to buy Hyder at £6.50 a share for £256M. ARCADIS, which bought EC Harris in 2011, employs 22,000 staff worldwide; Hyder employs 4000.

According to ARCADIS the deal “will be able to achieve significant revenue and cost synergies including savings through the use of global design excellence centres.”

ARCADIS chief executive officer Neil McArthur said:  “Through the transaction we see an excellent opportunity to better serve our clients by further deepening our capabilities in global design and engineering in growth markets whilst creating exciting career opportunities afforded by a stronger global growth platform for staff in both companies.”

Hyder chief executive Ivor Catto said:  "ARCADIS’ recommended cash offer announced today represents a significant premium to Hyder’s current share price.

“Although the board believes that Hyder has a strong future as an independent business,  it considers that this cash offer substantially recognises Hyder’s growth prospects and provides certainty, in cash, to our shareholders today.

“The resultant group should also provide further opportunities for our highly valued clients and staff.”

Hyder shareholders are backing the deal but the sale will not be finalised until October. The ARCADIS Hyder fit is being seen as a good one with few overlaps in capabilities. And the success of the ARCADIS takeover of EC Harris suggests that the Dutch consultant's collaborative style will equally help smooth the way for staff at Hyder. 

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