Carillion looks at £3bn merger with Balfour

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SUPPORT services and construction company Carillion made a bold move to capitalise on its successes with a possible £3bn merger with infrastructure firm Balfour Beatty.

Carillion and Balfour Beatty said in a statement that a merger would have the potential to create a company with market-leading services, investment and a construction business of considerable scale.

The deal would provide a lifeline to Balfour Beatty, which has struggled over the past 18 months after a string of profit warnings and the departure of its CEO Andrew McNaughton in May.

A merger between the two, which both employ around 40,000 people worldwide, could create a construction giant able to compete with players such as Spanish-listed Ferrovial and France’s Vinci.

Combined revenues could be more than £14bn with an order book of over £31bn, and create £200m worth of annual savings, Whitman Howard analyst Stephen Rawlinson said.

“If some trading issues improve and the savings can be achieved, the combined entity would be a candidate for FTSE 100 entry as market capitalisation should get to £4bn,” he added.

Carillion, whose projects include the redevelopment of London’s Battersea Power Station, has won a string of contracts in the past 18 months worth £10bn.

On Thursday, it announced it had been awarded three contracts worth up to £2.8bn in a joint venture with infrastructure firm Amey to deliver support services to the Ministry of Defence.

Carillion, which maintains railways, roads and military bases, said in March that it planned to diversify its facilities management or support services business into sectors such as oil, power distribution and highways maintenance.

A deal with Balfour would significantly expand its international business.