20th Aug 2014 06:46
LONDON (Alliance News) - Balfour Beatty PLC early Wednesday closed the door on a proposed merger with Carillion PLC, stating that Carillion's revised proposal late Tuesday failed to address two key concerns that it raised last week.
On Tuesday, Carillion said it was prepared to offer Balfour Beatty shareholders an even bigger majority stake in the merged business, but it continued to insist that Balfour Beatty's sale of its US project management business Parsons Brinckerhoff not be completed if the merger were to go ahead.
Under Carillion's new offer, which values Balfour Beatty at GBP2.09 billion, Balfour shareholders would get a 58.268% stake in the merged business, and also would receive the 8.5 pence per Balfour share cash dividend, worth GBP59 million, that Carillion had previously proposed. Carillion said Balfour Beatty had previously agreed to a 56.5% stake for its shareholders. Carillion's initial approach had envisaged Balfour Beatty shareholders taking a 51% stake.
However, Balfour Beatty on Wednesday said the new proposal did not address the considerable risks associated with the proposed business plan, including the strategy to reduce the scale of the UK construction business when it is "poised to benefit from a recovery in the market" and Carillion's continued intention to terminate the sale of Parsons Brinckerhoff, when talks are well advanced.
As a result, Balfour Beatty said it has concluded that the proposal is not in the best interests of its shareholders and has decided to reject the proposal. In addition, it said the proposal represents only a small value change in the terms compared to the proposal from Carillion rejected on August 11.
"Therefore the board will not be seeking an extension to the PUSU (Put Up or Shut Up) deadline of 5pm on August 21, 2014," Balfour Beatty said in a statement.
Instead, the company will continue with its current plan to refocus and simplify the group and grow its UK construction business and shed what it considers a non-core US project management arm. Balfour Beatty hopes to return up to GBP200 million of capital to its shareholders following the sale of Parsons Brinckerhoff.
Balfour Beatty said: "The board will also remain open to strategic value creating opportunities across the group while it concentrates on the restoration of value to its shareholders. It will consider all such opportunities, and the risks associated with their execution, taking full account of the significant recovery potential within the Balfour Beatty business."
The announcement comes just days after Standard Life Group PLC, a major shareholder in both companies, called for the pair to get back around the negotiating table and urged Carillion to sweeten its offer.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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