Balfour Beatty rejects Carillion’s offer as profit dives
Balfour Beatty yesterday posted a 53 per cent slump in underlying half-year profit to £22m, putting the infrastructure firm under pressure to prove that it can go it alone after rejecting a second takeover bid from rival Carillion.
The flailing FTSE 250 company, which has issued four profit warnings in two years and is currently without a permanent chief executive, yesterday rejected Carillion’s all-share offer, saying “there are a number of significant risks…which cannot be mitigated”.
Carillion responded by saying it “will give further consideration to its position and will make a further announcement in due course”.
The key sticking point is Balfour’s planned sale of its engineering consultancy arm Parsons Brinckerhoff (PB), which Carillion wanted to be included in the deal. Balfour argues that “there is no strategic logic for its retention other than to enhance the earnings of the combined group” and expects it to be sold off in the next month or two.
But with PB accounting for a significant chunk of Balfour’s revenue, Carillion would prefer to hang on to the asset. It is expected that Carillion will now engage in talks with Balfour’s shareholders in the hope that they will put pressure on the board to get a potential deal back on the table.
“It’s very much down to Balfour’s shareholders,” Andrew Gibb, analyst at Investec, told City PM
“We see little attraction in a standalone Balfour business excluding PB and we’re not entirely comfortable in their rationale for selling it.”
Under UK takeover rules Carillion has until 21 August to make another offer or withdraw from the process.
Balfour’s boss Andrew McNaughton quit in May amid a turbulent time for the company, which has struggled in its core domestic market.
The firm posted a three per cent drop in half-year revenue to £4.17bn. Shares closed 2.5 per cent higher at 243p.