Balfour Beatty Plc’ share price down, rejects increased merger bid from Carillion

Balfour Beatty Plc, the largest construction contractor in the UK, rejected an improved merger offer by Carillion Plc, saying that the proposed business plan is too risky. Carillion upped its bid for Balfour Beatty, aiming to form the largest builder in the UK, with market capitalization of some £3 billion (~$5 billion), and over 80 000 employees worldwide.

According to the statement of Balfour Beatty Plc, there are “considerable risks associated with the proposed business plan, including the strategy to significantly reduce the scale of the UK construction business when it is poised to benefit from a recovery in the market.”

The improved offer included a bigger stake for Balfour Beatty in the combined company. The deal would provide Balfour Beatty with 58.3% of the new company and a cash divided of 8.5 pence per Balfour share, in addition to a one-off cash payment of £59 million. The previous bid would have given Balfour 56.5% of the new company after the merger.

Balfour also said that no extension to the takeover deadline of August 21st will be considered, after Carillion formally requested it. Balfour added that the company will focus on its standalone strategy, part of which is the planned divestment of its New York-based engineering consultancy Parsons Brinckerhoff.

Carillions continued opposition to the disposal was another reason for Balfour to reject the merger, after it was the given reason for the previous declines as well.

Balfour Beatty Plc has been struggling through business hardships as of late, posting a number of profit warnings and discouraging earnings reports in the last 18 months.

Balfour Beatty Plc lost 5.45% to trade at 242.05 pence per share by 7:48 GMT, marking a one year change of -1.77% and valuing the company at £1.77bn (~$2.94bn). According to the Financial Times, 12 analysts offering 12-month price targets for Balfour Beatty Plc have a median target of 229.00 pence, with a high estimate of 280.00 pence and a low estimate of 183.00 pence. The median estimate represents a -7.66% decrease from the last price of 248.00.