Two of the UK’s biggest construction firms, Balfour Beatty and Carillion, have disclosed they are in talks over a potential £3 billion merger.
The discussions, which follow an initial approach from Carillion, come with Balfour struggling after a series of profits warnings and the recent departure of chief executive Andrew McNaughton.
Carillion has a market value of £1.45bn, while Balfour is now worth around £1.6bn after a sharp fall in its share price since March.
Balfour Beatty is a significant employer in Scotland and has links to Tayside and Fife, with co-founder George Balfour serving his apprenticeship at a workshop in Dundee’s Blackness Road, and one of the firm’s first contracts being the construction of a tramway in Dunfermline.
It has been rocked by project delays and contract disputes at its Cheadle-based engineering services business, which has been the source of the recent profit downgrades.
The company, which employs around 40,000 people worldwide, is considering the sale of US project manager Parsons Brinckerhoff, a business it bought for £380 million in 2009. Balfour and Carillion said the sale process for Parsons will continue regardless of the merger discussions.
Wolverhampton-based support services firm Carillion also employs more than 40,000 people, with businesses in the UK, Canada, the Middle East and north Africa, and annual revenues of more than £4 bn.
The two companies said in a statement last night: “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.”
Meanwhile, Carillion has restated its commitment to using local contractors as it prepares to take over responsibility for the upkeep of the airfield at RAF Leuchars and marine base at RM Condor.
The outsourcing specialist which, alongside joint-venture partner Amey, announced three similar deals for defence bases in England and Wales said it looked forward to improving the quality and energy efficiency of armed forces facilities across the UK during the five-year deals.
Alongside Amey it will be responsible for maintaining infrastructure and constructing new buildings under a £150 million framework “designed to support the UK Government’s objective of encouraging the use of small and medium-sized enterprises”.
The companies also said they would use the deals to provide work for retired military personnel and support reservists wherever possible.
Deals announced yesterday include facilities management agreements for the £435m Regional Prime Central contract, which includes Wales and northern England and sites like RAF Cranwell and Catterick Garrison; the £258m South East Regional Prime contract, which takes in Sandhurst and Horse Guards in London; and the £265m South West contract, including RAF Lyneham and Britannia Naval College.