CONSTRUCTION firm Balfour Beatty has delivered a detailed defence of its decision to reject the latest merger approach from Carillion.
Balfour said the offer was unchanged from a proposal it had turned down earlier this week, and reaffirmed its rejection, while spelling out its doubts about the synergy claims.
It described the merger approach as “opportunistic” and reiterated that it had a “clear standalone plan for delivering value”.
However analysts at Investec believe that resisting a deal would prove a missed opportunity for troubled Balfour, which earlier this week disclosed a 53 per cent slump in half-year profits, and is still looking for a new chief executive after the departure of Andrew McNaughton.
Balfour revealed on Monday that executive chairman Steve Marshall met Carillion counterpart Philip Green for talks a week before, following the rejection of an earlier proposal. But the potential tie-up has foundered on Carillion’s wish to cancel Balfour’s planned sale of its US business Parsons Brinckerhoff.
Balfour’s latest statement came a day after Carillion set out what it said were the powerful financial benefits of creating a £3bn combined group, and disclosed that it had been in talks with major shareholders.
Carillion has also pledged an additional 8.5p per share dividend for Balfour investors. Balfour responded to the pressure by saying it had “serious reservations” about the claims for synergies. In a more detailed response, the group said that the proposals would mean cutting the size of its UK construction business by two-thirds, eating into potential profitability gains at a time when it looks well-placed to benefit from a recovery in the sector.
It also highlighted the risks inherent in executing a merger deal.
“The implementation programme would be complex, requiring simultaneous business restructuring, integration and outsourcing, at the same time as a significant IT change programme which is already under way.”
Balfour added that it had decided to sell the Parsons Brinckerhoff business in the US “as it did not deliver material competitive advantage for the group and added significant complexity”.