Shares in construction firm Balfour Beatty opened over five per cent down after the company rejected a third takeover bid from rival Carillion.
The proposal, valued at over £2 billion, would have seen Carillion pay a 36 per cent premium to the recent average price of Balfour shares. However, this has been knocked by the British firm which stated that Carillion had failed to address the two concerns it had when it came to the idea of selling up.
Balfour is looking to sells its US operations which Carillion has been reluctant to purchase and it is also unconvinced that Carillion can deliver the costs savings it has suggested. The latest offer, announced on Tuesday (August 19th), was an improvement on Carillion's previous bid and would give Balfour shareholders 58.268 per cent control of the new organisation, compared to the previous offer of 56.5 per cent.
Announcing the deal on Tuesday, Carillion explained that it "continues to believe in the powerful strategic logic of a merger with Balfour Beatty". While the offer does represent a huge financial boost for Balfour, the main stumbling block is the future of the company's US business, Parson Brinckerhoff.
Balfour is keen to move on the engineering and design company but Carillion stated that any deal would halt its sale, despite Balfour being confident of generating £200 million to its shareholders once sold. This disagreement has meant Carillion has seen a third bid knocked back putting the potential takeover in doubt.
Prior to Balfour's rejection, Niall Dineen, portfolio manager at AGF International Advisors and a shareholder in both Balfour and Carillion, said: "The Carillion argument regarding synergies seems sensible, the Carillion idea of keeping the Parsons Brinckerhoff business seems sensible and the improvement in the offer should be enough to get Balfour Beatty to engage with them."
Find up to date information on spread betting strategies at City Index
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.