Carillion mega-merger falls apart

Wolverhampton services and constructon giant Carillion has reacted with 'surprise' after the shock collapse of merger talks with rival Balfour Beatty.

The deal could have created a £3.4 billion global business but has fallen apart over the fate of a little-known US-based engineering consultancy.

Balfour Beatty says it pulled the plug on the potential deal because of Carillion's 'wholly unexpected decision' to insist that Balfour's US business Parsons Brinckerhoff was included in the deal.

Balfour claimed the two sides had previously agreed to start merger discussions on the basis that Balfour continued with previously announced plans for the sale of Parsons, a business it bought for £380 million in 2009.

The change was 'not acceptable' and Balfour said it would now proceed with its own plans, including the sell-off of Parsons.

But, in a statement a few hours later, Carillion said that it had decided on Wednesday that, for the merger to satisify its requirements, "it would be essential to retain the stability and dependability of Parsons Brinckerhoff's earnings".

Carillion said it was "surprised by Balfour Beatty's reaction as the work to date has led to increased confidence in the potential to realise very material value for the benefit of both sets of shareholders."

The Wolverhampton-based company said it still believed there was a "powerful strategic rationale" for the merger and would consider its position further.

But, without the backing of Balfour's board, any merger deal seems doomed.

Parsons Brinckerhoff is a US-based engineering consultancy that is heavily involved in the UK's HS2 rail project. Balfour Beatty's US operations will have been a major attraction for Carillion, which has major contracts in Canada but doesn't currently work in the USA. Also it will have wanted to gain as much work on the lucrative HS2 project as possible.

The merger talks with Carillion came after Balfour had struggled with series of profits warnings and the departure of chief executive Andrew McNaughton.

Balfour, which was founded in London by George Balfour and Andrew Beatty in 1909, built the aquatics centre at the London 2012 Olympics site and in 2011 completed the painting of the Forth Bridge rail crossing.

Carillion employs more than 40,000 people worldwide, including around 600 at its headquarters in Wolverhampton, with established businesses in the UK, Canada, the Middle East and North Africa, and annual revenues of more than £4 billion.

Carillion traces its history back to the companies that became part of the Tarmac Group by the late 1990s, including Wimpey Construction.

In 1999, Tarmac split into two as it created a separate company focused on support services and construction, which was Carillion. Since then the company has acquired firms including Mowlem and Alfred McAlpine.

Projects involving Carillion have included the Olympic Media Centre and the Channel Tunnel Rail Link to St Pancras. It recently won the contract to redevelop Liverpool's Anfield stadium.

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