Balfour pays $362m for US military home builder Centex

The builder Balfour Beatty snapped up the American company Centex Construction for $362m (£184m) yesterday to try to tap into growing spending on prisons, hospitals and military housing.

The deal was hailed in the City and the shares were marked up 37.5p to 454.25p.

Balfour said Centex was well positioned in growing markets with about $5.6bn of secured and committed orders. The company, which boasts 1,500 staff, is a leading player in the military housing market with more than $750m of projects on its order book.

US commerce department figures show that spending on non-residential projects grew 13 per cent in December compared with the previous year.

Centex operates in the US states of Florida, Texas, Carolina and Washington DC. The deal will mean that more than a fifth of Balfour's sales will now come from the US. The company's existing management will stay in place, and will be allowed to run the operation as an autonomous business.

In addition to the US Government, customers include Disney, the hotel operator Marriott International and Bank of America.

Balfour's chief executive, Ian Tyler, said: "Centex is a high-quality building company, which gives us profitable critical mass in the US. We anticipate that it will also make a strong and immediate contribution to growth."

Centex's parent, Centex Corp, said it was selling up because it wanted to concentrate on its core business of home building.

Balfour's experience in the US has been mixed up to now, and the company has struggled to turn a profit. It made a loss in America in 2004 and was forced to write off the value of a Pennsylvania road building unit at a cost of £17m in the first half of last year. The move prompted the company to cut jobs, merge depots and quit bridge building work.

But despite this, yesterday's deal was well received.

Collette Ord, an analyst at Numis, said: "The market sees this as a bit of a steal by Balfour. It's a big rise in the share price but there are a lot of highly priced takeovers out there being done. The market is appreciating that Balfour has been able to execute this."