Was Balfour Beatty’s rejection of Carillion’s offer a rash decision?

 

Outlook Balfour Beatty has resoundingly rejected Carillion’s tweaked £2bn all-share takeover offer. There’s little chance of a further rise in the offer or an outbreak of peace talks ahead of the “put up or shut up” deadline at 5pm today.

The decision not even to entertain a further 30 days for potential talks is a gutsy call by what there is left of Balfour’s management.

In fact, it may prove to be a rash decision. Balfour shareholders are generally unhappy at the seeming lack of willingness to talk, and those who are shareholders in both companies more so, even if they see the current proposed bid as opportunistic.

All takeover bids are opportunistic. There wouldn’t really much point in making them if they weren’t. And all mergers are actually takeover bids, however prettily the management and public relations flacks like to dress them up.

Of course Carillion was chancing its arm in bidding for a rival business which is more than twice its size. But Balfour was a sitting duck, what with its profit warnings, the departure of its chief executive in May and the decision to sell one of the jewels in its crown, the US business Parsons Brinckerhoff. That ultimately proved the breaking point when friendly merger talks foundered in July.

It’s like the ancient joke whose punchline is “Now we’ve established the principle, let’s agree the price.” At some point Balfour is going to be legged over. It’s just a case of whose leg will be going over it.

The search for a new chief executive for Balfour continues, but who will take such a role when so much uncertainty surrounds its future? Any taker will want a water-tight contract with so many “change of control” clauses and pay-off promises that there will be little room left for his or her signature.

It could well be that, if the hoped-for second half improvement does not materialise, Carillion will be back at the end of six months. If things get even worse Balfour may have to beg Carillion for merger talks to restart.

The deal could well end up being done not too far in the future at an even lower value to today’s disappearing offer.

Whatever happens, hundreds of Balfour employees from the boardroom through middle-ranking site managers to hod-carriers must now fear for their jobs.

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