WSP Global Leads Race For £700m Balfour Arm
A Canadian engineering consultancy has moved into pole position to acquire a division of Balfour Beatty, the British construction giant, as rival Carillion decides whether to sweeten a £3bn proposal to merge the two companies.
Sky News can reveal that WSP Global Inc, which has a market capitalisation in Toronto equivalent to approximately £1.2bn, is in advanced talks to buy Parsons Brinckerhoff, a US-based consulting business, for about $1.2bn (£717m).
Negotiations between WSP and Balfour Beatty are understood to be at a critical stage, with a formal agreement possible in the next 10 days. A statement confirming the talks is expected to be made imminently.
An agreement to sell Parsons Brinckerhoff, which has helped to design and build more than a dozen schools in Newcastle, would deal a serious blow to Carillion's hopes of sealing a merger that would create a FTSE-100 construction and services group.
WSP is not yet in a formal period of exclusive talks about the deal, but it is understood to have edged ahead of rival bidders including WS Atkins, another UK-based company, in recent days.
A number of private equity firms including New Mountain Capital are also understood to have expressed an interest in Parsons Brinckerhoff, although it was unclear on Monday whether any of these bidders remained in the process.
WSP was a listed UK-based engineering group which agreed to be bought by Genivar, a Canadian rival, in 2012. The combined group then rebranded under the WSP name last year.
Sky News revealed that Balfour Beatty were in merger talks last month.
The discussions began on a friendly basis, but became acrimonious after Balfour Beatty accused Carillion of reversing its position on the sale of Parsons Brinckerhoff on the basis that its cashflows would be important to the combined group as they completed a merger.
Since then, the companies have clashed repeatedly over the possible cost savings that could be generated by a tie-up as well as the ability of Carillion's management team to successfully integrate them.
Balfour Beatty pledged last week to return up to £200m of the proceeds from the sale of Parsons Brinckerhoff to shareholders, while using the remainder to reduce its pension liabilities and strengthen its financial position.
The company, which was involved in the construction of the Aquatics Centre in the London Olympic Park, has issued a string of profit warnings this year, resulting in the ousting of its chief executive.
Carillion has until Thursday to persuade Balfour Beatty to return to the negotiating table or make a formal offer without the agreement of its prospective merger partner.
Weekend newspaper reports suggested that Carillion was contemplating a last-ditch sweetener, either by increasing the proportion of the combined group which would be owned by Balfour Beatty's shareholders, or by enhancing a dividend payout to them.
On Monday, David Cumming, head of equities at Standard Life Investments, said there was "scope for Carillion to modestly improve its terms" ahead of Thursday's deadline.
Balfour Beatty declined to comment.