WSP is poised to acquire Parsons Brinckerhoff, the consultant whose sale has become tangled with Carillion’s campaign to buy its giant rival Balfour Beatty.
Balfour decided to sell the firm to improve its balance sheet after a profit warning in May of this year. There were reported to be four companies in the running to buy the firm: two multidisciplinary engineers and two private equity firms.
Industry watchers assumed that one of the engineers was most likely to win, and most placed Atkins as the favourite, if only because it had come second to Balfour when the contractor bought Parsons five years ago for $626m.
Now Sky News has reported that Anglo-Canadian WSP has moved into pole position, and will probably pay around $1.2bn to complete the deal. It predicted that there would be an agreement in the next 10 days, and that an official statement was imminent.
The deal would be a blow to Carillion’s merger plans. At Balfour Beatty’s interim results presentation last Monday, it was revealed that Parsons had contributed 70% of the group’s profit, and it seems that Carillion required that income stream to make the deal stack up.Â
It also fitted with Carillion’s plan to create a group with a greater proportion of high-value services and fee-based operations, and with old-style contracting – the bulk of Balfour’s business by revenue – reduced to a third of turnover.
Carillion has a deadline of Thursday to make Balfour Beatty another offer, or it could mount a hostile takeover bid.
In the past week, both sets of managers have been conducting an unusual auction, in which they compete to give Balfour’s shareholders the greatest cash incentive to back them.
Carillion has promised to pay Balfour shareholders a final 8.5p cash dividend – a total of £59m – on top of any final dividend the enlarged group would pay.
Balfour Beatty told the City last week last week it would return up to $330m from the proceeds of the Parsons Brinckerhoff sale to shareholders, using the remainder to reduce its pension liabilities and strengthen its financial position.