Carillion woos Balfour Beatty investors with extra dividend offer

Support services giant Carillion has sent a strong signal that it is not yet willing to give up on a £3bn merger with Balfour Beatty, as it admitted to courting a number of its rival's biggest shareholders with the offer of an extra dividend for 2014.

Carillion has been holding meetings with Balfour Beatty's biggest investors since Monday, when its rival walked away from a proposed £3bn tie-up for a second time. Carillion has told its competitor's shareholders that they could expect to receive an additional cash dividend of 8.5p per Balfour Beatty share - totaling £59m - when they would ordinarily have been paid a final dividend for the 2014 financial year. This payment would be on top of any final dividend that they would receive as shareholders of a merged group.

Carillion said in a statement on Thursday that it believes the cost base of an enlarged company could be reduced by £175m a year until the end of 2016 and earnings would be "significantly enhanced from that year". These cost savings would translate into a £1.5bn increase in the value of the enlarged group before any re-rating, it said.

The group also published further details on where it believed synergies and cost savings could be achieved, including at head office, in the supply chain and also by consolidating the two companies' property portfolios.

Assuming a merger could be completed by December 31, Carillion said it expects it would deliver these synergies "progressively, anticipating that 40pc of them would be achieved by the end of 2015 and the full 100pc by the end of 2016".

The statement comes three days after Balfour Beatty rejected the proposed £3bn tie-up for a second time, claiming it had "lost confidence in the likely delivery of a successful transaction". The impending sale of Balfour Beatty's US consultancy unit, Parsons Brinckerhoff, remains at the heart of disagreements between the two companies, with Carillion wanting to keep the division as part of an enlarged group.

Carillion updated the market on Thursday at the same time as it released half-year results, which showed a 5pc increase in pre-tax profit to £67.5m although revenue dropped by the same percentage to £1.87bn.

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