Balfour dangles £200m in front of investors as it rejects merger again

Builder defends independent future despite first-half profits slumping by more than half

Balfour Beatty offered a £200m sweetener to shareholders yesterday, despite tumbling profits, as the building company rejected a second overture from rival Carillion over a £3bn merger.

The company plans to return the cash to shareholders in the event of a £1bn sale of its US consulting arm Parsons Brinckerhoff – the business on which the on-off merger has hinged.

Carillion had initially agreed to the sale of Brinckerhoff,  which accounts for a third of Balfour’s profits, but then stunned the UK company’s board by changing its mind two weeks ago, throwing the proposed deal into doubt.

The US company’s latest proposal included keeping Brinckerhoff, but covering the costs of bidders for the business, if they could be persuaded to continue bidding on the basis that the merger might fail. Balfour shareholders would also get a final dividend payment.

But Balfour, which bought Brinckerhoff in 2009, sees no future for the operation as part of the group and the executive chairman Steve Marshall said it made “little sense” to hang on to it as the sector rides a wave of takeover activity. The “well advanced” sale process is said to have attracted bidders including the engineer WS Atkins and Mr Marshall said there was still “strong competitive” interest.

He criticised Carillion for in effect asking Brinckerhoff’s would-be buyers to “make a bet” that the merger would fail and said the board’s fundamental concerns “had not been addressed”.

Balfour’s investors would have owned 56.5 per of the new company under the all-share merger, although Carillion would have secured the top management positions. Carillion only said yesterday that it would “give further consideration to its position”.

Mr Marshall insists his company has an independent future but the half-year results underlined the lingering problems at the UK’s biggest builder, which sacked its chief executive in May and has been hit by four profit warnings in two years. Its construction business sank to a £69m operating loss while overall pre-tax profits shrank by more than half to £22m on revenues down 2 per cent at £4.85bn. Balfour will be smaller in future, cutting its geographical footprint to focus mainly on the US and UK.

Mr Marshall said: “Anybody is entitled to table an offer for a public company at any point ... But the key thing we are going to be talking about with investors is the future for a standalone Balfour Beatty and we’re very confident that the plans we’ve got in place will take the company forward.”

The City has not completely written off hopes of a merger, with an estimated £250m in cost savings potentially on offer. Balfour also left the door open as it said the it “remains open to strategic value-creating opportunities” – which could include the sale of a £1bn portfolio of stakes in private finance initiative projects.

Stephen Williams at  the investment manager Brewin Dolphin said: “The tone of the Carillion statement recently seemed to be one of anger that the talks had been terminated, but Balfour Beatty is now open to an external bid and there is substantial value to be unlocked. We are not convinced that remaining independent is a viable option.”

Broker Liberum’s Sebastian Jory said: “There is a long to-do list and there will be no quick-fix in the go-it-alone strategy.”

Start your day with The Independent, sign up for daily news emails
Sport
Seth Rollins cashes in his Money in the Bank contract to win the WWE World Heavyweight Championship
WWERollins win the WWE World Heavyweight title in one of the greatest WrestleMania's ever seen
Arts and Entertainment
Louis Theroux: By Reason of Insanity takes him behind the bars again
tvBy Reason of Insanity, TV review
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Arts and Entertainment
tvPoldark, TV review
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor