Carillion is in talks with Balfour Beatty over a possible merger that would create a £3billion group. The approach from Carillion follows a difficult 18 months for Balfour Beatty, which has had a series of profit warnings and lost its CEO Andrew McNaughton in May.
A deal with Balfour, which operates in more than 80 countries providing construction, engineering and facilities management services, would significantly expand Carillion’s international business.
Carillion, which maintains British railways, roads and military bases, said in March that it planned to diversify its support services business into sectors such as oil, power distribution and highways maintenance.
Balfour said in July it would take another £35million hit to its profit after trading in its mechanical and electrical engineering division deteriorated.
In a statement on its website, Carillion said: “The Boards of Carillion and Balfour Beatty believe that the merger of the two groups has the potential to create a market leading services, investments, and construction business of considerable depth and scale. Work is now underway to develop a strategy and outline business plan for a combined entity, underpinned by the evaluation of achievable synergies, future financing arrangements and a number of other essential supporting workstreams.
“In evaluating the merits of the merger, the two boards will, inter alia, wish to be satisfied that such a merger would lead to very significant value creation for the benefit of both sets of shareholders.”
The companies have until 21st August to announce a firm intention to merge or state that a deal will not take place.
