Balfour Beatty to buy US project group for $626m

Friendly takeover of Parsons Brinckerhoff to be financed by rights issue

Balfour Beatty announced it is buying the US professional services business Parsons Brinckerhoff in a $626m (£380m) friendly takeover yesterday, which it plans to finance through a £353m cash call.

There has been speculation for a number of days that the construction and engineering group would ask investors for money as it seeks to extend its overseas and project management businesses. The deal, which is subject to shareholder approval, will be paid for by a £353m, three-for-seven rights issue, to be priced at 180p. The rights come at a 46.8 per cent discount of the stock's closing price on Wednesday. Balfour Beatty's shares yesterday closed up 7.9 per cent, at 371.3p.

"The deal fits the strategy we announced three years ago. Balfour Beatty is strong in its core businesses, but our infrastructure customers require us to offer a greater range of services," said Ian Tyler, Balfour Beatty's chief executive. "Being a market leader in the US civil infrastructure, transportation and power markets, buying Parsons Brinckerhoff is a transformation deal in this respect."

Professional services – a range of activities including maintenance services and project management – is in vogue as construction and contractor groups look to generate maximum revenues from their projects.

Mr Tyler ruled out any job losses as a result of the deal, insisting that the takeover was about growth. The announcement was welcomed by analysts, although some did warn that there is a risk that key people at Parsons Brinckerhoff may leave the combined company. "Buying professional services is about people, and people can walk out of the door, particularly if they don't want to work for a contractor," said Andy Brown, an analyst at Panmure Gordon.

"This does look like a good fit for the company, however. Parsons will allow Balfour Beatty to offer clients more of an end-to-end product, and it also fits in with what is happening in the US, especially in relation to the Obama stimulus plan."

The rights issue will be underwritten by JP Morgan Cazenove, RBS Hoare Govett and Citigroup. "I don't think there will be any problems with getting the rights issue away. Why would investors not buy at 180p when the stock is trading around the 370p mark?" said Mr Brown.

Parsons Brinckerhoff is an employee-owned group, which makes it harder to value. However, industry watchers said that the £380m price tag looked reasonable. "It looks like they are paying close to six times historic earnings," said Andy Gibb of Oriel Securities. "This does not look overly aggressive, although the deal is not earnings enhancing until 2011, so we will be looking to see if the group can find any synergies before then."

Last year, New York-based Parsons Brinckerhoff recorded revenues of $2.34bn. As well as its US operations, it also operates in the UK and Asia, giving Balfour Beatty a profile in India, China and Australia for the first time.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
techPatent specifies 'anthropomorphic device' to control media devices
Voices
The PM proposed 'commonsense restrictions' on migrant benefits
voicesAndrew Grice: Prime Minister can talk 'one nation Conservatism' but putting it into action will be tougher
News
Ireland will not find out whether gay couples have won the right to marry until Saturday afternoon
news
News
Kim Jong-un's brother Kim Jong-chol
news
News
Manchester city skyline as seen from Oldham above the streets of terraced houses in North West England on 7 April 2015.
news
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?