14th Aug 2014 06:58
LONDON (Alliance News) - Carillion PLC Thursday said it has held meetings with a number of major Balfour Beatty PLC shareholders since Monday, as it seeks to push through a merger between the two construction companies.
On Monday, FTSE 250-listed Balfour Beatty said it had "lost confidence" in a successful merger with Carillion PLC and concluded that it is in its best interest to continue with its current plan to refocus and simplify the group, including the sale of its US project management business Parsons Brinckerhoff.
Balfour Beatty said it terminated discussions after Carillion revised its proposal to demand that Parsons Brinckerhoff remain part of Balfour Beatty.
However, Carillion said Thursday that it continues to believe in the "powerful strategic logic" and financial benefits of a merger with Balfour Beatty and is therefore continuing to consider its position.
The company said it is confident that as a direct result of the merger, the cost base of the combined group could be reduced by at least GBP175 million a year by the end of 2016 and that earnings would consequently be significantly enhanced from that year.
These cost savings would represent a capitalised value of over GBP1.5 billion before any re-rating, Carillion said.
Based on initial discussions with banks and assuming the retention of Parsons Brinckerhoff, Carillion said it is highly confident that GBP3 billion of available funding would be accessible to the combined group, providing substantial headroom above its actual borrowing requirements after transaction costs and the costs of the proposed restructuring.
Carillion said it has proposed that Balfour Beatty's shareholders receive an additional cash dividend, or equivalent, of 8.5 pence per Balfour Beatty share at the time that Balfour Beatty's final 2014 dividend would otherwise have been paid in 2015.
"This would be in addition to the final 2014 dividend they would be entitled to receive as shareholders in the enlarged group," Carillion said.
Carillion said it will make a further announcement in due course, although there can be no certainty that it make another offer.
The construction company also said Thursday it will report a 5% increase in pretax profit for the first half of 2014, although revenue will dip 5% to GBP1.87 billion from GBP1.96 billion.
Ahead of its results to be published next week, FTSE 250-listed Carillion said it will post pretax profit of GBP67.5 million for the six months ended June 30, up from GBP64.2 million a year earlier.
It said underlying operating margin increased to 5.5% from 5.1% a year earlier. Carillion said it will increase its interim dividend 2% to 5.6 pence from 5.5 pence.
"Carillion continues to perform in line with the board's expectations, reflecting the benefits of the early actions we took in response to the economic downturn, notably the planned rescaling of our UK construction business, together with our continuing strong work-winning performance," Chairman Philip Green said in a statement.
"Having realigned our businesses to the size of the markets in which we operate, the Group is well positioned to benefit from its strong work-winning performance over the last 18 months and from its high-quality pipeline of contract opportunities across our target markets," he added.
Carillion said it expectations for 2014 remain unchanged, and it expects to make further progress in the medium term.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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