Balfour Beatty sells Parsons Brinckerhoff for £820 mn
04 Sep 2014
UK's largest construction firm Balfour Beatty has sold its engineering and construction consulting arm Parsons Brinckerhoff, the business that was in part responsible for the collapse of the US construction services giant Carillion's £3-billion merger with its British rival.
Earlier this year, the company made three bids, the last amounting £2.1 billion, to acquire Balfour. Finally, in August, Carillion announced it would no longer pursue the UK firm.
According to Balfour, it had agreed to offload Parsons to Canadian company WSP Global for a cash consideration of £820 million.
Balfour said £200 million would be returned to its shareholders and around £85 million would be used to cut the company's pension fund deficit.
Under UK law, Carillion cannot make another offer for six months, unless it is invited back or another bidder made bid for Balfour.
Parsons had emerged as a battleground for the two companies as Carillion said it needed Balfour to keep Parsons and its stable cash flow - one third of Balfour's earnings came from the business - to cover the merger restructuring costs.
Carillion added it would cover any Parsons' bidder's costs to the tune of £10 million if its merger with Balfour were to go ahead.
The sale price assumes cash of £67 million is retained within Parsons Brinckerhoff and is conditional upon the approval of Balfour Beatty shareholders. It is also subject to certain anti-trust and other approvals.
The sale is expected to be completed in the fourth quarter.
According to Balfour, the competitive sale process had demonstrated the value of the Parsons Brinckerhoff business within a rapidly consolidating global professional services sector.
The consideration of £820 million, less £67 million of cash retained within Parsons Brinckerhoff, represented a multiple of 11x underlying EBITDA for the year ended 31 December 2013.
In a press release Balfour Beatty said, "Following the sale, and the recent revaluation of the PPP portfolio, the group's key strategic priorities are:
- restoring the value of the UK construction business, including progressively returning it to peer group margins;
- continuing to build on the good performance of the investments and services businesses;
- leveraging the growth opportunities in US buildings, US civils, rail and power, and the Group's Far East and Middle East Joint Ventures;
- realising further indirect overhead savings and shared service efficiencies across the Group; and
- continuing to assess all other value creation opportunities.
Balfour will be repositioned as an Anglo-American infrastructure group focused on construction, services and investments, comprising:
- top tier national and regional construction businesses in the UK and US;
- a leading international investments business;
- a services division with a number of specialist construction and asset management businesses; and
- successful construction joint ventures in the Far East and Middle East.
Balfour's executive chairman Steve Marshall said, "The board believes that the sale price of £820 million delivers both a significant return on our original investment and a compelling level of value creation for shareholders - which remains the key focus of the board.
"The sale of Parsons Brinckerhoff follows the recent revaluation of our investments portfolio, which underlines the potential of this division to create value internally and across the group.
"In the US, our core construction business is well positioned in a recovering market. In the UK we see the potential for margins to progressively recover to peer group levels. Our services business, meanwhile, is well placed to benefit from the growing investment in infrastructure. Together, these elements will provide a strong foundation for an incoming Group CEO to take the company forward."