Balfour Beatty plc Calls Off Merger With Carillion plc

Balfour BeattyWell, that didn’t last long. After news of a £3bn potential merger between Balfour Beatty (LSE: BBY) and Carillion (LSE: CLLN) broke on Friday last week, it now appears that the deal is in tatters.

Balfour Beatty issued a terse statement this morning, effectively blaming Carillion for the breakdown of talks. Balfour Beatty said “the termination of discussions follows Carillion’s wholly unexpected decision to only progress the possible merger in the event that Parsons Brinckerhoff [a US-based design and engineering outfit] remained part of the potential combined entity.”

The construction firm added that “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… This change in the proposed terms is not acceptable to the Board of Balfour Beatty”.

So there.

Back to square one for the share price

Shares in both companies fell on the news, as you would expect. Balfour Beatty slipped 6% to 238p while Carillion was 4% lower at 338p. That pretty much returns both share prices to where they were before the deal was revealed last week.

Nevertheless, it does seem like a strange stumbling block, and no doubt investors in Balfour Beatty will be less than impressed at the company’s stance on this issue after the series of profit warnings that has battered the company’s share price in recent months.

Balfour Beatty said it would continue with its previous plan to sell Parsons Brinckerhoff, and to find a new CEO. But it wouldn’t be that surprising if Balfour Beatty was encouraged to re-open discussions at some point, especially if its trading performance doesn’t recover. Despite being the bigger company of the two, it certainly seems to be in a far weaker position.

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Stuart Watson has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.