Balfour Beatty drops plan to merge with Carillion - UPDATE

31st Jul 2014 07:17

Construction group Balfour Beatty has called off its planned merger with rival Carillion after Carillion said it would only press ahead with the deal if Balfour ditched plans to sell its Parsons Brinckerhoff US engineering division.Balfour, which has faced challenges in the last few months resulting in the departure of chief executive Andrew McNaughton, said the decision by Carillion was "wholly unexpected" and was contrary to the terms on which Balfour agreed to start the merger talks.It said in a statement: "This change in the proposed terms is not acceptable to the board of Balfour Beatty. "Balfour Beatty will proceed in accordance with its own business plan, including the competitive sale process of Parsons Brinckerhoff currently well underway. It will also continue to actively progress its search for a group chief executive."The company said discussions had only been at board level, with detailed due diligence having not yet begun.Carillion said in a statement that it was surprised by Balfour's decision, saying talks to date had indicated increased confidence in the value of the deal.It said, however, that the deal would need to include "the stability and dependability" of PB's earnings to meet its requirements.It said it would further consider its position in view of the fact that Balfour's books must be acceptable and both sets of shareholders needed to back the deal."Carillion will make a further announcement in due course," it said.Broker Liberum was "surprised" that Carillion wanted to keep Parsons Brinckerhoff, given that they have historically been opposed to owning a consultant. "Perhaps Carillion could only make the maths stack up by owning PB, which may be a source of some worry for Balfour's shareholders."At 08:35 on Thursday, shares in Balfour were down 4.2% to 240.2p, with Carillion down 3.2% to 341.9p.PW