The putative sale of  Balfour Beatty's (BBY) predominantly US-based business Parsons Brinckerhoff appears to have been the sticking point in a proposed merger with Carrillion (CLLN). The combined group would have created a global construction giant worth around £3 billion.

Balfour Beatty's announcement this morning, that it is terminating discussions with Carillion regarding a possible tie-up, sees shares in the heavy construction specialist plunge 6.3% to 236.9p. Wolverhampton-based Carillion fares little better on the news, shedding 4% to 339.1p.


The deal would appear to have foundered on back of a rather large misunderstanding. According to a statement from Balfour, Carillion thought it was getting the Parsons Brinckerhoff business while Balfour Beatty maintains that they had always planned to sell it, doubtless in a bid to underpin its balance sheet.

Balfour insists that Carillion's 'wholly unexpected decision to only progress the possible merger in the event that Parsons Brinckerhoff remained part of the potential combined entity' was 'contrary to the basis upon which the Balfour Beatty Board agreed to engage in preliminary discussions.'

Balfour has been struggling over the past year and a half and this has been underlined most acutely by the departure of CEO Andrew McNaughton following the group's third profit warning on 6 May and Carillion's overtures only underline Balfour Beatty's vulnerability to takeover.

Issue Date: 31 Jul 2014