Carillion has been forced into making an embarrassing clarification on its claim that a merger with Balfour Beatty would create of £1.5bn of savings.
At the weekend The Times published an interview with the firm’s chairman, Philip Green, in which he is quoted as saying: “Our synergy numbers have been audited, and at £1.5bn it is virtually the same as the current market value of either company.”
Now Carillion admit the “synergy numbers” have not been audited by an independent accounting firm.
A statement from the firm said: “Carillion wishes to clarify that, while its previous statement that “as a direct result of the merger, the cost-base of the combined group could be reduced by at least £175 million per annum by the end of 2016” has not been “audited” in the technical sense, as set out in Carillion’s announcement made on August 14 2014, an independent accounting firm has provided public assurance, having tested the basis of preparation of the statement in line with the requirements of the Code, and has publicly reported that it has been properly compiled on the basis stated in that announcement.
“Also, Carillion’s previous statement that the cost savings it has identified “would represent a capitalised value of over £1.5 billion before any re-rating” has not been audited or reported on by an independent accounting firm. Rather, that number was calculated on the basis set out in detail in Carillion’s announcement of 14 August 2014.
Balfour Beatty have twice rebuffed Carillion’s proposals, however it has been reported that Carillion are now expected to sweeten the deal by offering Balfour increased control of the group.
Last week Carillion offered an increased cash dividend of 8.5 pence per Balfour Beatty share, which was rejected.
The deal has also stuck on the issue of Carillion’s proposed retention of the Parsons Brinckerhoff business - a move that Balfour Beatty said would “exacerbate the scale of the challenge” at a time when the management team would be trying to downsize the UK construction business.
Carillion now has three days left in which to broker a deal with Balfour Beatty, before the initial merger talks deadline.
Carillion which operates a regional office in Gosforth, employs around 1,500 in the North East, while Balfour Beatty employs around 850 in the region.