31st Jul 2014 10:50
LONDON (Alliance News) - Balfour Beatty PLC Thursday said it has ended its merger talks with peer Carillion PLC because Carillion had demanded that Balfour halted its planned sale of US project management business Parsons Brinckerhoff, a demand it called unexpected and contrary to early agreements.
In a tersely worded statement that comes just a week after news of the potential GBP3.05 billion merger of the British infrastructure and construction companies broke, Balfour accused Carillion of misleading it.
"The termination of discussions follows Carillion's wholly unexpected decision to only progress the possible merger in the event that Parsons Brinckerhoff remained part of the potential combined entity. This change is contrary to the basis upon which the Balfour Beatty Board agreed to engage in preliminary discussions," Balfour 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 the 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," it added.
Carillion said it was surprised by Balfour Beatty's reaction. It said it had decided on Wednesday that it could only do a deal if Parsons Brinkerhoff was included.
"The board of Carillion yesterday concluded, on the basis of analysis to date, that for the combination to satisfy Carillion's requirements ... it would be essential to retain the stability and dependability of Parsons Brinckerhoff's earnings," it said in its own statement.
"The board of Carillion 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," it added.
Carillion said it continued to believe in doing a deal, but would consider its position given that it required that a deal be contingent on successful due diligence and the recommendation of the boards of both companies. It will make a further announcement in due course.
Balfour said it would continue with its planned sale of Parsons Brinckerhoff, adding that a competitive sale process was already well under way.
It had put Parsons Brinckerhoff up for sale in early May, having bought it back in 2009 for GBP380 million. It said at the time that it had decided that the inclusion of Parsons wasn't bringing any competitive advantage to the group.
That decision came at the same time as former Chief Executive Andrew McNaughton stepped down with immediate effect as the company issued a profit warning, blaming further struggles for its construction business. It has been trying to restructure the unit for two years, but said progress had been slower than it hoped. It had said the unit was increasingly struggling to win profitable new business as clients were imposing increasingly stringent conditions on contractors.
In its statement Thursday, Balfour said it will continue looking for and new CEO to replace McNaughton.
Both companies were among the biggest fallers on the FTSE 250 Thursday. Balfour Beatty was down 1.9% at 248.00 pence, while Carillion was down 2.6% at 344.00 pence.
By Steve McGrath; [email protected]; @stevemcgrath1
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