Carillion expected to sweeten offer to woo Balfour shareholders

Carillion directors met yesterday to hammer out the terms of an improved offer to salvage a £3bn merger with Balfour Beatty.

The deal on offer, which if completed would create the largest construction firm in the UK, is expected to see Carillion try to woo Balfour Beatty investors by granting them greater control of the combined group.

Balfour Beatty management have as yet been resolute in their defence, branding Carillion’s overtures to their investors as “opportunistic”.

In a detailed rebuttal of the merger approach, released on Friday, Balfour Beatty poured cold water on the potential £1.5bn in cost savings through combining the groups, adding that any savings would be “materially lower”.

The deal’s other sticking point has been Balfour’s plans to sell Parsons’s Brinckerhoff, one of its American divisions. Carillion is prepared to walk away from the merger unless the sale process is put on hold.

Carillion is fast running out of time to find a solution to the deadlock as the company has just three days until the “put up or shut up” deadline expires. The takeover panel rules would restrict the company from making another offer for a six-month period.

Balfour investors have currently been offered 56.5pc of the merged entity, but that is expected to be sweetened to as much as 58.5pc in order to get the deal over the line.

Analysts from broker Investec have estimated that the combined group could have an estimated market value of about £4.4bn, placing it at the lower end of the FTSE 100 blue chip index of UK companies.

“In our view, Carillion’s merger looks compelling and far more attractive than relying on a management team at Balfour Beatty that has presided over shareholder value destruction in the past few years,” said Andrew Gibb at broker Investec.

Balfour Beatty has given investors a rough ride over the past two years with four profit warnings and the departure of its chief executive in May.