“But then… let’s not get carried away: Nothing is done… until it’s done.” This was Pinkers’s concluding comment to the proposed merger of Balfour Beatty and Carillion. Here we go… As investors we always have to remind ourselves: Money in the bank! … is all that matters! Tough luck… or perhaps good luck, after all?
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. Broker Liberum was “surprised” that Carillion wanted to keep Parsons Brinckerhoff, given that they have historically been opposed to owning a consultant.
Both stocks recorded double digit drops, this morning. But hey… this, of course, is not the end of the story. It has merely exposed how vulnerable the whole sector is to M&A. Carillion has shot itself in the foot… if not amputated it! This public U-turn is not only hugely embarrassing but exposes the company’s own weaknesses and putting itself into play.