Balfour Beatty share price rises as it spurns Carillion's advances yet again

Balfour has disputed Carillion's claims a merger will save the pair £175m a year, saying a deal will reduce its exposure to the oh-so-valuable UK construction market.

by Emma Haslett
Last Updated: 20 Aug 2014

The will-they-won’t-they drama between construction giants Carillion and Balfour Beatty looks increasingly like it’ll conclude in a determined ‘they won’t’, after the latter issued a notice to the stock exchange fiercely disputing figures published yesterday by Carillion saying the pair could save £175m a year by merging.

So far, Balfour’s main battleground during the deal has been over Parsons Brinckerhoff, the US design consultancy it’s trying to sell. Carillion doesn’t want it to sell the business, but Balfour, which issued a profit warning in May, reckons it can make somewhere between £580m and £650m out of it, which it badly needs. It also argues that it’s gone to third-round bids on the business. To pull out now would just be rude…

But this morning Balfour found a new bone of contention: in its statement, it said it reckons Carillion’s £175m-a-year money-saving scheme involves ‘reducing Balfour Beatty’s UK construction revenues by up to two thirds’, which it believes can only be done with a ‘significant reduction in overheads’.

It’s only fair that we warn you the terms ‘synergy’ and ‘cost savings’ are about to come up a lot: ‘This cost reduction will reduce the amount of available synergies that flow through to profitability. Cost savings driven by shrinking the business should not be confused with synergies,’ said Balfour.

‘These reductions in cost will reduce the amount of the £175m that could enhance profitability. A smaller UK construction business would have a lower addressable cost base, further reducing the potential synergies available from any transaction.’ In other words: Balfour thinks Carillion’s got its sums wrong.

This morning, shareholders mainly seemed hopeful it’ll all be over soon: Balfour’s share price (which over the past year has decreased just under 5%) rose all of 0.6%, while Carillion’s fell 2.2%.

But the fat lady hasn’t sung yet: Carillion has asked to be given until August 21 to convince Balfour shareholders it can be good for the company.

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