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.”

peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
Highs and lows of the cast's careers since 2004
New Articles
i100... with this review
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam