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Carillion Raises Bid to Value Balfour Beatty at $3.5B

Carillion Plc made a new merger bid for Balfour Beatty Plc, valuing the U.K.’s biggest builder at 2.1 billion pounds ($3.5 billion).

The offer would give Balfour Beatty investors 58.3 percent of the new company and a cash dividend of 8.5 pence per Balfour Beatty share, Carillion said in a statement. That represents a premium of 36 percent to weighted average share price before the talks were announced. A previous offer would have given Balfour shareholders a 56.5 percent stake.

“Carillion remains committed to moving forward in a constructive and collaborative way with the board and management of Balfour Beatty,” Carillion Chairman Philip Green said in the statement, adding that a deal would create “very significant value for the shareholders of both companies.”

Balfour Beatty had rejected Carillion’s advances several times. The sticking point for London-based Balfour is the Parsons Brinckerhoff engineering-consulting unit that it’s trying to divest. Chairman Steve Marshall has said he sees “no logic” in retaining the New York-based business and that calling off the sale is too risky should a merger with Carillion ultimately fail.

Balfour Beatty shares rose 4 percent to 257.8 pence at 4:19 p.m. in London, erasing earlier losses and valuing the company at 1.8 billion pounds. The stock has advanced 11 percent since the approach was made public on July 24. Carillion fell 0.2 percent to 336.6 pence, giving it a market value of about 1.4 billion pounds.

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Balfour Beatty’s board will consider Carillion’s latest announcement and respond in due course, it said in a statement.

Carillion had said that keeping Parsons Brinckerhoff would give the combined group access to 3 billion pounds of financing. Carillion said today that should the merger proceed, it would “expect the disposal of Parsons Brinckerhoff not to be completed.”

Merging with Balfour would generate annual cost-savings of at least 175 million pounds, Carillion reiterated today

“It’s a considerable premium to where it’s trading at the moment,” Olivia Peters, a London-based analyst at RBC Capital Markets, said by telephone, adding that a deal would benefit all parties. “If I include synergies I get a premium of about 60 percent.”

A merger would combine Carillion’s extensive services business with Balfour’s building operations, which have struggled with a slowdown in construction activity, to form a builder with a market value of about 3 billion pounds. Carillion has been expanding its maintenance offerings for industries such as railways and telecommunications.

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