Market Report: Carillion making advances to Balfour Beatty in 'deal of the decade'


Yet another blockbuster merger looks to be on the horizon, this time in the construction section with Carillion making advances to Balfour Beatty.

Both mid-cap builders leapt higher on news that Carillion has kicked off talks over a potential £3bn tie-up. Most investors and analysts lapped up the news, with Liberum hailing it as the potential “deal of the decade” in the sector.

But some were more cautious. Balfour has been hit by a string of profit warnings and is currently without a chief executive, and Anthony Codling at Jefferies warned that figuring out accurate forecasts would be “akin to aiming at a moving target”. Carillion, up 24.3p at 362.8p, will need “very sharp pencils” to avoid getting burned in the deal, Mr Codling thinks. Balfour surged 21p to 253.1p.

The FTSE 100 failed to register gains despite Royal Bank of Scotland flying 35.4p higher to 364.2p on surprisingly good profit figures. The blue-chip index gave up 29.91 points to 6,791.55. Among those pulling the index lower were BSkyB, which lost 50.5p to 874.5p on news of a placing at 870p to fund deals in Europe, and the drug giant GlaxoSmithKline, off 46.5p at 1,423p.

Petrofac also suffered after a downgrade from Société Générale. The bank thinks the oilfield services firm’s “working capital requirement is of real concern”. Petrofac declined 25p to 1,127p.

Tesco’s woes mount. Data from Markit shows short-selling interest has jumped by 6 per cent since chief executive Philip Clarke left at the start of the week. Tesco fell 4.45p to 270.35p.

A decline in first-half pre-tax profits and a weaker second quarter hit the electrical engineer Spectris, 161p lower at 1,934p.

Lonmin is still recovering from the five-month strike that blighted production at its South African platinum mines, but an increase in output in the third quarter helped it rise 11.3p to 241p.

On AIM, the first mining float in three years got off to a flyer. Bacanora Minerals was offered at 33p but closed at 85p.

The online sports betting group Webis said performance is good and it is set for a boost from the World Cup. But it still retreated 0.12p to 2p.