In what could be the deal of the 21st century in UK construction, Carillion and Balfour Beatty, two of the UK’s largest contractors, have confirmed that, following an approach from Carillion, they are engaged in preliminary discussions about a merger.
The boards of the companies said that a deal had the potential to create "a market leading services, investments, and construction business of considerable depth and scale". It said that would was under way on deciding what kind of a company the new entity would become, what its business plan would be, and how the joint business would be reconfigured.Â
The boards added that: "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 two parties have agreed that Balfour Beatty’s publicly announced sale process for Parsons Brinckerhoff, which is already in progress, will not be affected by this announcement.
The two companies have said that they will decide by 21 August whether they will go ahead with the deal.
Balfour Beatty is presently ranked 24th in the list of the world’s largest contractors with a turnover of about £13.3bn, roughly three times greater than Carillion’s £4.1bn.Â
However, Balfour has been weakened by a series of profit warnings over the past two years, often accompanied by the removal of the member of senior management who had been brought in to implement a recovery plan. News that the merger was instigated by Carillion has led to speculation that the Wolverhampton-based contractor is making an opportunistic bid for its giant rival.Â
The share price of both companies rose 10% on news of the merger talks.