Balfour Beatty Plc, Britain’s biggest building company, is seeking takeover targets for its Parsons Brinckerhoff unit to broaden the reach of the New York- based project-manager, Chief Executive Officer Ian Tyler said.
Planning and administration firms serving water and power clients would be attractive purchases, alongside organic growth, Tyler said. Parsons designs mining infrastructure such as railways, and this side of the business may be expanded in Australia, he added.
Winning the design phase of a project with Parsons opens up opportunities for the U.K. company to sell additional construction services. Balfour has been expanding Parsons, whose mining customers include Xstrata Plc, BHP Billiton Ltd. and Anglo American Plc, since buying the business in 2009 for $626 million.
“We’ve good relationships with the big mining houses and the question is how we develop that further,” the CEO said in an interview at Balfour’s London offices. “We’ve a lot more delivery and operational capability than PB alone ever had. They’re saying, what can you do for us? That’s what we’re working through.”
Expansion in mining and other industries comes as Balfour faces cutbacks in government-financed projects on its home turf. The bulk of the reduction is expected to come from a drop in spending on schools, countered by investment in power stations to replace Britain’s aging coal- and nuclear-powered plants, he said in the Jan. 14 interview.
‘Bullish’ on U.K.
The 50-year-old said he’s “reasonably bullish” that Balfour’s U.K. construction markets will avoid an all-out recession. Commercial building won’t likely recover significantly in 2011, though 2012 and 2013 will see “areas of activity,” including nuclear power stations, he said.
“If you put that all together, I think you’re going to see the market relatively flat for a year or two,” Tyler said. “I think we’ll start to see it pick up in 2013.”
Balfour has shunned big acquisitions in Europe as costs would be too high and the company would struggle to add knowledge or value to them, Tyler said. Actividades de Construccion & Servicios SA, Spain’s biggest builder, made a hostile offer for Hochtief AG after building a stake in its German rival.
“If we buy a contractor there, or a professional services firm, you buy at full value -- what do you do with it? Whenever we’ve bought businesses, we’ve had a very clear strategy to drive higher value, revenues, cashflow in those businesses,” he said.”
Balfour will instead seek to expand in emerging markets, including South America. The company formed a joint venture with Indian builder GVK Power & Infrastructure Ltd. to bid for highway construction contracts there. Joint ventures or an acquisition will be used to drive growth in the Asian country, he said.
“You have to have a joint-venture partner or a significant acquisition or something that anchors you to the territory,” Tyler said. “The idea of leaping into a place like India with some sort of expeditionary force coming out of London -- you won’t make money out of that at all.”
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