Balfour Beatty Plc made an official statement today, announcing that it rejected a renewed merger bid from Carillion Plc. If finalized, the deal would have created the largest builder on the territory of the U.K., with a market cap of about 3 billion pounds ($5 billion).
This was the second merger proposal made by Carillion, after first round of merger talks collapsed on July 31st. However, Carillion Plc has made no changes to its bid and offered the same 56.5% to 43.5% split in the ownership of the combined company.
“The Board has lost confidence in the likely delivery of a successful transaction and has therefore concluded that the current proposal from Carillion is not in the best interests of Balfour Beatty shareholders,” Balfour said in a statement today, that was cited by Bloomberg. The company also added that it remains open to “strategic value creating opportunities.”
Some of the main concerns about the merger were related to the eventual deals impact on the sale of the U.S.-based design consultancy Parsons Brinckerhoff. The consultancy was bought by Balfour Beatty in 2009 in a deal estimated at $600 million. According to analysts estimates the company is worth between 580 million and 650 million pounds. Balfour Beatty plans to return about 200 million pounds to its shareholders in case it manages to sell its US-based division.
According to the companys statement, which was cited by Bloomberg, the sale of Balfour Beattys Parsons division is “a key strategic objective”, as there is “no strategic logic” to retaining the business. Reorganization costs and working-capital outflows, which were considered potentially higher than estimated by Carillion, were also cited by the company as some of the reasons for rejecting the merger bid.
Liberum Capital analysts, including Mr. Joe Brent, commented in a note to customers, which was cited by Bloomberg: “A deal now looks less likely. The organic road to recovery will be long and not always smooth, but it nevertheless offers huge margin recovery potential. There is a long to-do list and there will be no quick-fix in the go-it-alone strategy.”
Balfour Beatty Plc was 2.87% up to trade at 243.70 pence per share by 12:06 GMT, marking a one year change of +0.08%. According to the information published on CNN Money, the 11 analysts offering 12-month price targets for Balfour Beatty Plc have a median target of 230.00 pence, with a high estimate of 280.00 pence and a low estimate of 170.00 pence. The median estimate represents a -3.04% decrease from the last price of 237.20 pence.
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