Hundreds of construction jobs could be in jeopardy following the surprise news that Balfour Beatty and Carillion are in talks that could lead to a merger by September.
The move comes after an approach by Carillion to the struggling Balfour Beatty which has been rocked by a series of multi million pound provisions made because of problem contracts. The contractor’s chief executive Andrew McNaughton was sacked after making a third profit warning in May and has not yet been replaced.
Carillion chief executive Richard Howson is being tipped in the City to head the merged company. Neither company is commenting on what a new structure could look like.
The new company would be better placed to compete worldwide for infrastructure projects and support services. Balfour Beatty is the biggest contractor in UK construction, earning £10Bn revenues a year, employing some 40,000 people, and active in over 80 countries. The £4.1Bn turnover Carillion has a similar number of employees and is active across the UK, Canada, the Middle East and in North Africa.
Both companies are constituents of the FTSE 250 Index and a merged group would have a stockmarket value of over £3Bn. In a joint statement the boards of Carillion and Balfour Beatty confirmed that they are holding discussions about a possible merger.
They said: “The Boards of Carillion and Balfour Beatty believe that the merger of the two groups has the potential to create a market leading services, investments, and construction business of considerable depth and scale. Construction work is now underway to develop a strategy and outline business plan for a combined entity, underpinned by the evaluation of achievable synergies, future financing arrangements and a number of other essential supporting workstreams.”
The two parties have agreed that Balfour Beatty’s sale process for Parsons Brinckerhoff, part of an 18 month turnaround programme under way since April last year, will proceed unaffected by the merger talks.