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Balfour Beatty leaves door open as profits halve

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Infrastructure group Balfour Beatty (LON:BBY) has provided a bit more detail behind its decision to reject merger overtures from sector peer Carillion (LON:CLLN).

According to Balfour Beatty, merger discussions started in late May on the understanding Balfour’s shareholders would end up with 56.5% of the merged company, and with Carillion’s management fully behind the proposed sale of Balfour’s Parsons Brinckerhoff business.

In late July, Carillion’s position changed, in that it wanted to retain the Parsons Brinckerhoff business.

Balfour’s view is that continuing bid discussions with Carillion risks undermining the Parsons Brinckerhoff sales process and there is no strategic logic to retaining the business, other than to enhance the earnings of the combined group.

In its interim results statement, Balfour Beatty said the competitive sale process of Parsons Brinckerhoff is well advanced and, subject to satisfying the interests of key stakeholders, it is anticipated that the group will return up to £200 million to shareholders.

Carillion has indicated it will respond to Balfour’s comments in due course.

Meanwhile, Balfour Beatty’s half-year results were in line with expectations.

Revenue was down 2% to £4.9bn from £5.0bn while underlying profit before tax more than halved to £22mln from £47mln, with much of the blame due to operational issues in its UK mechanical & electrical engineering business.

The board left the door open to the possibility of resumed merger discussions with Carillion, saying it “remains open to strategic value creating opportunities across the group while it concentrates on the restoration of value to its shareholders”.

Quick facts: Balfour Beatty plc

Price: 217 GBX

LSE:BBY
Market: LSE
Market Cap: £1.5 billion
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