End of line for UK ‘super contractor’ as Balfour Beatty pulls out of merger talks

UK contracting giant Balfour Beatty announced today that is has pulled out of talks with Carillion over a possible merger.

The termination of talks – "with immediate effect", the company said in a statement – resulted from a disagreement over the sale of Balfour Beatty’s consulting arm, Parsons Brinckerhoff. 

Carillion, another UK major, appears to have surprised Balfour Beatty by insisting suddenly that the consultant be kept.

"The termination of discussions follows Carillion’s wholly unexpected decision to only progress the possible merger in the event that Parsons Brinckerhoff remained part of the potential combined entity," the Balfour Beatty statement said.

"This change is contrary to the basis upon which the Balfour Beatty Board agreed to engage in preliminary discussions. It is also contrary to the joint announcement released on 24 July 2014 which confirmed that the sale of Parsons Brinckerhoff would be unaffected by the merger discussions and also a presentation to Balfour Beatty’s Board by Carillion on 28 July 2014. This change in the proposed terms is not acceptable to the Board of Balfour Beatty."

Balfour Beatty said it will proceed with its own business plan now, including the sale of Parsons Brinckerhoff and its search for a new, top-flight group CEO.

The announcement will come as a relief to any employees of the two firms who feared for their jobs under the deal.

News of the possible merger surprised the industry last week and raised the prospect of the UK’s first "super contractor". The combined firm would have had a turnover of £17.5bn and around 80,000 staff.

The chief executive of one of the UK’s leading consultants told GCR that the deal marked a sign of things to come: "We weren’t expecting it," he said, "but it’s not shocking in the sense that that’s the way the contracting industry has gone generally in the UK: the mantra is the bigger the better."

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