Carillion (CLLN.L) Determined To Close the Merger Deal with Balfour Beatty PLC (BBY.L)

Carillion (CLLN:L), a British based construction firm, recently talked to the shareholders of Balfour Beatty PLC (BBY.L) in order to get their consent for the merger deal that Carillion (CLLN.L) put forward. The construction company told the shareholders of Balfour Beatty PLC (BBY.L) that they would get extra 175 million in their earnings due to the costs savings that would result if the merger deal moved forward.

It is important to note here that Carillion (CLLN.L) has already offered Balfour Beatty PLC (BBY.L) two takeover deals that the latter company has rejected. Carillion (CLLN.L) wants to create a $ 5 million company group that would be better equipped to compete against the international brands. According to the sources, Carillion (CLLN.L) has been given a deadline of August 21, 2014; the company can make its final offer by then.

In July, the two companies were reported to be in their negotiation process. However Balfour Beatty PLC (BBY.L) rejected the deal when Carillion (CLLN.L) refused to sale its engineering unit based in United States, known as Parsons Brinckerhoff.

Despite the rejections, Carillion (CLLN.L) remained consistent in its efforts. The company, on the last trade day, August 14, prepared a list of arguments that it would present in the Takeover Panel in order to get the consent of some of the biggest shareholders of Balfour Beatty PLC (BBY.L).

The company said that the merger deal would result in a saving of 175 million pounds yearly through the combined supply chains, streamlines offices and the fusion of IT departments. The company also said that the synergies were rated at 1.5 billion pounds, and that was before any adjustment in the stock value. Carillion (CLLN.L) also promised to deliver to the shareholders of Balfour Beatty PLC (BBY.L) an extra 8.5 pence as the cash dividends.

However, Balfour Beatty PLC (BBY.L) said that it has serious doubts about the synergies argument.

Balfour further said that its shareholders would benefit more from the plan and strategies that the company developed instead of the policies that Carillion (CLLN.L) proposed. It also commented that the cancellation of the sale process of Parsons Brinkerhoff was quite risky.

Balfour said that it believes in its strategies and policies. It further commented that it should focus more on its UK and U.S. business rather than the merger proposals.

The share of both the companies went up when the talks of the merger proposal went public. Stocks of Balfour Beatty PLC (BBY.L) rose by 1.5 percent and reached to 240 pence whereas the shares of Carillion (CLLN.L) saw an increase of 6.3 percent and reached to 340 pence.

Liberum’s analysts said that Carillion (CLLN.L) is quite determined.

The analysts further said that the synergy value is too large to turn down, especially when Carillion (CLLN.L) is confident that it would deliver at least £175 million.

The analysts also said that the final synergies could go up to £250 million.

As far as the market capitalization of Balfour Beatty PLC (BBY.L) is concerned, the numbers are reported to be around £1.66 billion