Carillion to sweeten pill to entice Balfour Beatty

Huge construction merger could be back on the cards as deadline looms

CONSTRUCTION giant Carillion is set to sweeten its merger proposals for rival Balfour Beatty whose key investors are urging the reopening of talks ahead of Thursday’s deadline, The Mail on Sunday has learned.

City sources suggest Carillion will encourage Balfour Beatty’s investors to put pressure on the board to begin fresh talks. The sources believe that Carillion could offer an enhanced cash dividend to investors, in addition to the 8.5p additional dividend it has already offered – worth £59 million – which was to have been paid this year.

The money for this could come from the sale of Parsons Brinckerhoff, the US design consultancy arm which Balfour Beatty has put up for sale with a price tag of about £650million. Carillion previously wanted to retain this division so a sale would remove a huge stumbling block.

Balfour Beatty, under acting chairman Steve Marshall, rejected Carillion’s latest all-share merger proposal on Friday. However, it is understood that Carillion is in contact with leading Balfour Beatty shareholders this weekend.

The investors are believed to be keen for Marshall’s board to ‘re-engage’ with Carillion. A source close to the deal said: ‘Balfour Beatty has delivered four profit warnings in 18 months. Shareholders have lost confidence in the company.’

City analysts believe a tie-up between the two firms could create savings of up to £250million, though Balfour Beatty disputes the figure.

The terms of the proposed merger would see Balfour Beatty take 53 per cent of the new company, while Carillion would have 47 per cent. If the numbers are tweaked Carillion might lose support from its own shareholders.

Balfour Beatty has no chief executive as it sacked Andrew McNaughton in May. Its stock market value has fallen by a quarter to £1.6 billion over the past six months. Carillion said last week its profits had risen by 5 per cent to £67.5million.

A combined company would be an industry behemoth employing 80,000 staff with revenues of £14billion. Balfour Beatty’s best known projects include Heathrow’s Terminal 2b and London’s Olympic Aquatic Centre.

Neither Carillion nor Balfour Beatty was prepared to comment.