25th Jul 2014 06:00
LONDON (Alliance News) - Balfour Beatty PLC late Thursday confirmed it is in preliminary talks for the creation of a construction services powerhouse via a GBP3 billion merger with Carillion PLC.
A merger of the two FTSE 250 British construction firms, which have flagship projects such as London's Olympics Aquatics Centre and the redevelopment of Liverpool's Anfield football stadium, would put them on track to enter into the FTSE 100 index as a joint entity.
Balfour made the announcement following media speculation on Thursday that the two groups were in talks.
"The boards of Carillion and Balfour Beatty believe that the merger of the two groups has the potential to create a market leading services, investments, and construction business of considerable depth and scale," Balfour said in a statement on its website.
The company added that both groups are developing a strategy for a combined entity and want to be sure that a merger would bring significant value creation to both sets of shareholders.
Balfour, which has a market capitalisation of GBP1.6 billion, has seen its shares perform poorly recently after sacking its Chief Executive Andrew McNaughton in May after just over a year in control.
On the other hand, Carillion, which is valued at GBP1.45 billion, has seen shares increase by more than 13% during the last year.
Balfours shares closed down 1.1% at 232.1 pence on Thursday, while Carillion shares closed up 0.7% at 338.7 pence.
Sky News said on Thursday that, although it is unclear how far advanced the talks are and whether it will go ahead at all, Carillion Chief Executive Richard Howson is likely to run the merged entity.
The news comes after Balfour announced a profit warning earlier this month due to worse performance at its construction business but it said at the time it was continuing to explore the possibility of selling its US-based consulting and engineering group Parsons Brinckerhoff, which it bought for USD600 million in 2009.
Late on Thursday, Balfour said that both parties have agreed that the sale process of Parsons Brinckerhoff will proceed unaffected by the merger announcement, subject to achieving acceptable value and terms.
Carillion has had a better period, winning the Anfield redevelopment project earlier in July and holding a total order book of GBP18.5 billion at the time.
By Tom McIvor; [email protected]; @TomMcIvor1
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Balfour BeattyCarillion Plc