TIDMBBY TIDMCLLN
RNS Number : 7413O
Balfour Beatty PLC
11 August 2014
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH
JURISDICTION
THIS ANNOUNCEMENT IS NOT AN ANNOUNCEMENT OF A FIRM INTENTION TO
UNDERTAKE ANY TRANSACTION UNDER RULE 2.7 OF THE CITY CODE ON
TAKEOVERS AND MERGERS (THE "CODE") AND THERE CAN BE NO CERTAINTY
THAT ANY TRANSACTION WILL PROCEED NOR AS TO THE TERMS OF ANY
TRANSACTION
FOR IMMEDIATE RELEASE
Balfour Beatty plc
11 August 2014
Rejection of Carillion's Merger Proposal
Following Balfour Beatty's announcement on 31 July 2014 that
discussions with Carillion had been terminated, Balfour Beatty
wishes to inform the market about the initial proposal put to it by
Carillion, a subsequent revised proposal and the reasons for
Balfour Beatty's rejection of those proposals.
Initial Proposal
Carillion initially approached Balfour Beatty on 27 May 2014
with a nil premium merger proposal. Based on closing share prices
on this date the implied ownership split would have been 51% of the
combined entity to Balfour Beatty shareholders and 49% to Carillion
shareholders.
Following successive negotiations with Carillion over several
weeks Balfour Beatty agreed to engage with Carillion at the end of
June on the basis of the following key terms:
-- All-share combination with 56.5% undiluted ordinary equity to
Balfour Beatty shareholders; 43.5% to Carillion shareholders.
Respective percentage shares fixed with no variation with any share
price movement
-- Confirmation from Carillion that they were supportive of the
Parsons Brinckerhoff disposal process and in the event of a leak, a
joint leak announcement would be released including a public
statement of support for the sale process from Carillion, subject
to achieving acceptable value and terms for this business
-- At Carillion's request, the equity split was predicated on
Balfour Beatty retaining the proceeds from the sale of Parsons
Brinckerhoff as freely available cash
-- Balfour Beatty would nominate three non-executive director
positions in a total board of 10. Steve Marshall would be Deputy
Chairman while the Chairman, CEO and CFO roles would be appointed
by Carillion.
In addition, it was agreed between Balfour Beatty and Carillion
that a possible offer announcement would be made under Rule 2.4 of
the Code prior to the start of more detailed due diligence. This
announcement would include a pre-condition related to a minimum
level of synergies required to be identified for the merger to
proceed. The synergy level was to be quantified through joint work
teams and in due course validated, and reported on, by reporting
accountants. The transaction would then be subject to mutual due
diligence including agreeing an acceptable business plan and
achievable delivery of synergies.
Following the agreement of the terms of engagement above,
discussions between Balfour Beatty and Carillion continued until
the meeting on 30 July when it was first communicated to Balfour
Beatty that Carillion wished to change the terms so as to retain
the Parsons Brinckerhoff business. This followed the joint leak
announcement on 24 July and the presentation by Philip Green,
Chairman of Carillion, and Richard Howson, CEO of Carillion, to the
Board of Balfour Beatty on 28 July where the terms were reaffirmed.
Following the meeting on 30 July, Balfour Beatty announced that
discussions had been terminated on 31 July on the basis of a
fundamental concern regarding the proposed treatment of Parsons
Brinckerhoff.
Revised Proposal
Carillion proposed a revised set of terms at a meeting,
requested by Mr Green, between himself and Mr Marshall on 3 August
2014. At the meeting Mr Green proposed to keep the 56.5% / 43.5%
split of the business as previously agreed but made the following
changes and additions to the key terms of the proposal:
-- Parsons Brinckerhoff to remain in a combined business, as per
Carillion's proposed change to the terms; however, Carillion would
agree to cover appropriate bidder costs for the remaining bidders
in the sale process, if these bidders could be persuaded to proceed
on the basis that the merger did not ultimately happen
-- Balfour Beatty shareholders receive the final dividend payment for 2014
-- Extension of the Put-up or Shut-up deadline to 28 August with
the interim results for both companies deferred to the same date.
The intention was to also release an announcement in accordance
with Rule 2.7 of the Code on this date and to accelerate detailed
due diligence to meet this timeline.
In addition, Mr Green indicated that Carillion had expressed
confidence in a higher level of announced synergies.
Reasons for Rejection of Carillion's Proposal
Balfour Beatty's Board has carefully considered the revised
proposal from Carillion including the business plan for the
combined business. While the Board is mindful of the synergies that
might be achieved through a combination with Carillion, the Board
has concluded that there are a number of significant risks many of
which cannot be mitigated. These risks include:
-- The risk of undermining the Parsons Brinckerhoff sales
process which is a key strategic objective of the Group,
particularly as there is no strategic logic for its retention other
than to enhance the earnings of the combined group
-- Bidders for Parsons Brinckerhoff may not regard the cost
cover as adequate to remain fully committed to the process with the
resultant risk that the sale process would be terminated
-- Risk that a failed sale process would materially impact the
motivation and retention of Parsons Brinckerhoff management and
employees and damage its competitive position in a rapidly
consolidating professional services market
-- Impact of terminating the Parsons Brinckerhoff sale process
would be compounded if the merger with Carillion did not complete,
in which case any associated loss of value would be entirely for
the account of Balfour Beatty's shareholders
-- Significant execution risk associated with the integration of
the two businesses would be substantially increased by any material
revenue reduction in Balfour Beatty's Construction Services UK
business
-- Any material reduction in Balfour Beatty's revenues in
Construction Services UK would create unacceptable operational and
financial risks:
- Increase restructuring costs and cash and working capital outflows
- Reduce the addressable cost base and bankable synergies
- Remove profitable business opportunities, taking away future earnings recovery potential
-- The risk of engaging in detailed due diligence with a
competitor while having serious reservations about the transaction
and its deliverability
-- The risk of not meeting the envisaged announcement date under
the revised proposal of 28 August given Balfour Beatty's due
diligence requirements and the impact on the Parsons Brinckerhoff
process should an alternative, later announcement date be
required.
In light of these considerations on the revised proposal, the
Board has lost confidence in the likely delivery of a successful
transaction and has therefore concluded that the current proposal
from Carillion is not in the best interests of Balfour Beatty
shareholders. With the Parsons Brinckerhoff sale process proceeding
in line with the Board's expectations, the Board is clear that its
current plans to refocus and simplify the Group, including the sale
of Parsons Brinckerhoff, remains the most attractive option. In
this case, 100% of cost savings achieved by refocusing and
simplifying the Group would accrue to Balfour Beatty
shareholders.
The Board remains open to strategic value creating opportunities
across the Group while it concentrates on the restoration of value
to its shareholders. It will consider all such opportunities, and
the risks associated with their execution, taking full account of
the significant recovery potential within the Balfour Beatty
business. Balfour Beatty is also today updating the market on its
first half performance with the publication of its interim
results.
There can be no certainty that an offer will be made by
Carillion for Balfour Beatty nor as to the terms of any such
offer.
This announcement is not being made with the consent of
Carillion.
Enquiries:
Balfour Beatty
Anoop Kang, Head of Investor Relations
+44 (0) 20 7216 6913
anoop.kang@balfourbeatty.com
Patrick Kerr, Director of Corporate Communications
+44 (0) 20 7963 4258
patrick.kerr@balfourbeatty.com
Maitland
Liz Morley
James Isola
+44 (0) 20 7379 5151
Directors' Responsibility Statement
The Directors of Balfour Beatty accept responsibility for the
information contained in this document. To the best of the
knowledge and belief of the Directors, who have taken all
reasonable care to ensure such is the case, the information
contained in this document is in accordance with the facts and does
not omit anything likely to affect the import of such
information.
This announcement is for information purposes only and does not
constitute an offer to sell or an invitation to purchase any
securities or the solicitation of an offer to buy any securities,
pursuant to the offer or otherwise.
Disclosure requirements of the Code
Under Rule 8.3(a) of the Code, any person who is interested in
1% or more of any class of relevant securities of an offeree
company or of any securities exchange offeror (being any offeror
other than an offeror in respect of which it has been announced
that its offer is, or is likely to be, solely in cash) must make an
Opening Position Disclosure following the commencement of the offer
period and, if later, following the announcement in which any
securities exchange offeror is first identified. An Opening
Position Disclosure must contain details of the person's interests
and short positions in, and rights to subscribe for, any relevant
securities of each of (i) the offeree company and (ii) any
securities exchange offeror(s). An Opening Position Disclosure by a
person to whom Rule 8.3(a) applies must be made by no later than
3.30 pm (London time) on the 10th business day following the
commencement of the offer period and, if appropriate, by no later
than 3.30 pm (London time) on the 10th business day following the
announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of
the offeree company or of a securities exchange offeror prior to
the deadline for making an Opening Position Disclosure must instead
make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the
offeree company or of any securities exchange offeror must make a
Dealing Disclosure if the person deals in any relevant securities
of the offeree company or of any securities exchange offeror. A
Dealing Disclosure must contain details of the dealing concerned
and of the person's interests and short positions in, and rights to
subscribe for, any relevant securities of each of (i) the offeree
company and (ii) any securities exchange offeror, save to the
extent that these details have previously been disclosed under Rule
8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies
must be made by no later than 3.30 pm (London time) on the business
day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a
securities exchange offeror, they will be deemed to be a single
person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree
company and by any offeror and Dealing Disclosures must also be
made by the offeree company, by any offeror and by any persons
acting in concert with any of them (see Rules 8.1, 8.2 and
8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Takeover Panel's website at www.thetakeoverpanel.org.uk,
including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first
identified. You should contact the Panel's Market Surveillance Unit
on +44 (0)20 7638 0129 if you are in any doubt as to whether you
are required to make an Opening Position Disclosure or a Dealing
Disclosure.
Publication on website
A copy of this announcement will be made available subject to
certain restrictions relating to persons resident in restricted
jurisdictions on Balfour Beatty's website at
www.balfourbeatty.comby no later than 12 noon (London time) on 12
August 2014.
The content of the website referred to in this announcement is
not incorporated into and does not form part of this
announcement.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION.
THIS ANNOUNCEMENT DOES NOT CONSTITUTE A TAKEOVER OFFER OR AN OFFER
OF SECURITIES. NO OFFER OR SALE OF SECURITIES MAY OCCUR IN THE
UNITED STATES UNLESS THE TRANSACTION HAS BEEN REGISTERED UNDER THE
US SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR IS EXEMPT FROM
REGISTRATION THEREUNDER. NO SECURITIES HAVE BEEN OR WILL BE
REGISTERED UNDER THE SECURITIES ACT AND THERE WILL BE NO PUBLIC
OFFER OF SECURITIES IN THE UNITED STATES.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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