A GIANT building company poised to take over Newcastle firm Eaga in a £300m deal has reassured its 4,000 staff that it will grow the business and not cut jobs.
Carillion yesterday said it had agreed with the board of the environmental services company on a takeover deal which values it at around £306.5m and is expected to be completed in two months.
Carillion’s director of group corporate affairs John Denning sees the purchase as a means for Carillion to offer energy services alongside the range of services it currently provides for clients.
He said: “It’s about making Eaga bigger, not smaller. If it’s joining the Carillion group – and it’s not a done deal yet – we intend for it to be a business unit reporting to the chief executive which will be based in the North East.”
Investors were surprised last week when Eaga announced it had been sounded out about a potential offer from an “independent strategic party from outside the energy industry”.
The company, which runs large national projects such as the Government’s Warm Front home insulation scheme, has had a tough couple of years and last week began shedding 700 staff from that scheme as public spending is cut.
But it is bringing in new work on the digital broadcasting switchover and installing solar power glass in homes, and hopes to start recruiting again in a couple of years.
Carillion had looked into the prospect of partnering with Eaga, but decided an acquisition would be more appropriate.
It sees opportunities in the areas of carbon dioxide emission reduction and energy security, and has echoed Eaga’s claims last week that it is supportive “in principle” of Eaga’s ambitions with solar photo-voltaic glass.
Mr Denning said: “Carillion is a market leader in private finance and we see solar PV as an exciting opportunity. With Carillion’s help, Eaga can close that deal and get on and make it work. It’s very much something we support.
“We originally approached Eaga with a view to working with them on a joint venture. In our strategic review in 2009 we identified the low-carbon market as probably the biggest opportunity market in the support space we work in, but we didn’t have a particularly strong offering in that space.
“Eaga has some great market opportunities and people and expertise. We’ve got the financial resources and experience with private finance. If we owned them it would then allow us to have the energy services capability in-house. From both points of view, it has considerable advantages.”
The deal would feature a cash element of £192m, as well as an offer of shares to meet the demands of the Eaga Employee Trust, which owns 36.7% of Eaga’s equity.
Seymour Pierce analyst Caroline de La Soujeole said: “Eaga has a very strong presence in the domestic market and Carillion will want them to transpose that experience further into the commercial sector.”
Yet another name may go – but the jobs will remain
THE probable acquisition of Eaga by Wolverhampton-based Carillion would result in yet another name being crossed off the shrinking list of companies in the North East which are on the stock market.
There have been a series of recent departures from the number of homegrown listed companies, most recently Sunderland transport giant Arriva and Newcastle oil pipeline company Wellstream.
Several of these departures have been due to takeovers. Arriva was bought by German public transport firm Deutsche Bahn for £1.6bn at the end of August, while Newcastle’s Wellstream is expected to be de-listed from March 8 after its £800m acquisition by General Electric.
Several have recently decided to remove themselves from the stock exchange. Gateshead construction firm Tolent quit a year ago after 10 years on AIM, while 2009 saw both Prudhoe-based telecoms group BNS and Killingworth’s Metnor de-list. Northern Recruitment Group de-listed in 2008.
Northern Rock was nationalised, furniture company SCS was bought by a private equity firm, and Premium Bars & Restaurants moved to Manchester before going into administration.
Bede went into administration before being bought by Israeli firm Jordan Valley Semi-Conductors, while Angel Biotechnology relocated to Edinburgh in 2007. Scottish & Newcastle was snapped up by Heineken and Carlsberg for £7.8bn in 2008.
Brewin Dolphin’s divisional development manager Vinay Bedi said: “It’s a great pity we’re going to lose another public company HQ in the region, but we’re hopefully not going to lose an employer that’s important to the region.
“This is part and parcel of what happens in tough economic times.”