The board of Balfour Beatty has rejected a third iteration of merger proposals from Carillion, saying the terms fail to address its key concerns.
Under Carillion’s latest terms, issued on Tuesday afternoon, Balfour shareholders would have 58.3% of the combined firm. They would also get a cash dividend of 8.5p per share.
In a statement to shareholders, Balfour Beatty said the latest terms still failed to address its concern about reduction in scale of the UK Construction business when it is poised to benefit from a recovery in the market; and the plan to stop the sell-off of Parsons Brinckerhoff.
Carillion issues a statement which read: “The Board of Carillion continues to believe in the powerful strategic logic of a merger with Balfour Beatty and that, as a direct result of the merger, the cost-base of the combined group could be reduced by at least £175m per annum by the end of 2016, that earnings would consequently be significantly enhanced from that year and that these cost savings would represent a capitalised value of over £1.5bn before any re-rating.
“Since its announcement on August 142014, Carillion has continued discussions with Balfour Beatty’s major shareholders.
“Carillion believes that the revised proposal provides a compelling case for the Board of Balfour Beatty to request the Panel on Takeovers and Mergers to extend the PUSU deadline and to resume discussions with Carillion, particularly when seen in the light of Balfour Beatty’s proposal to continue on a standalone basis, including the possibility of a return of capital to Balfour Beatty shareholders of up to £200m.”
Philip Green, chairman of Carillion added: “Given the scale of the prize for shareholders of both Balfour Beatty and Carillion from a merger of the two companies, the Board of Carillion remains committed to moving forward in a constructive and collaborative way with the Board and management of Balfour Beatty to create a world-class business and very significant value for the shareholders of both companies.”
Balfour Beatty said its Board had “unanimously concluded that the proposal is not in the best interests of its shareholders” and would not seek an extension to the PUSU (“Put Up or Shut Up”) deadline of 5pm on August 21, 2014.
Earlier this week Carillion were forced into making an embarrassing clarification on Philip Green’s claim in an interview with The Times that its savings numbers had been properly audited.