20th Aug 2014 14:24
LONDON (Alliance News) - Carillion PLC Wednesday withdrew its interest in a merger with fellow FTSE 250 construction firm Balfour Beatty PLC, after Tuesday's sweetened offer was rejected by Balfour Beatty because it failed to address two key concerns raised by the target last week.
"The board of Balfour Beatty has not agreed to Carillion's proposal or to request an extension to the 'Put Up or Shut Up' deadline which expires at 5pm tomorrow, August 21, 2014. Carillion therefore today announces that it is no longer pursuing such a merger," Carillion said in a statement.
On Tuesday, Carillion had 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 latest offer, which valued Balfour Beatty at GBP2.09 billion, Balfour shareholders would have got a 58.268% stake in the merged business, and also would have received 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 morning 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 had concluded that the proposal is not in the best interests of its shareholders and had decided to reject the proposal. In addition, it said the proposal represented 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 end of Carillion's pursuit of Balfour Beatty comes just days after Standard Life 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
additional reporting by Samuel Agini; [email protected]; @samuelagini
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