* Carillion raises merger offer for third time
* Balfour valued by Carillion at $3.5 billion
* Takeover deadline expires in two days
(Adds analyst quotes, bullets, updates shares)
By Li-mei Hoang and Nishant Kumar
LONDON, Aug 19 British construction firm
Carillion ramped up the pressure on Balfour Beatty
to reopen merger talks on Tuesday, making a third offer
which valued the engineering company at 2.1 billion pounds ($3.5
Following talks with Balfour's biggest shareholders,
Carillion made its new approach two days before a takeover
deadline expires that would force it to walk away.
Balfour has rebuffed two previous proposals by Carillion to
create a bigger group better placed to compete for major
international contracts against the likes of Spain's Ferrovial
The two British companies revealed in July they were in
talks, but Balfour walked away only days later after Carillion
insisted it cancel the planned sale of its U.S. engineering and
design business Parsons Brinckerhoff.
Niall Dineen, portfolio manager at AGF International
Advisors which is a shareholder in both companies, said the
latest improved offer should be enough to get Balfour to engage.
"The Carillion argument regarding synergies seems sensible,
the Carillion idea of keeping the Parsons Brinckerhoff business
seems sensible and the improvement in the offer should be enough
to get Balfour Beatty to engage with them," he said.
Carillion's statement on Tuesday was the first time it has
revealed financial terms of its approaches to Balfour.
It said under the new offer, Balfour shareholders would have
58.3 percent share of the combined firm, and a cash dividend of
8.5 pence per share. It said that would value Balfour at 2.1
billion pounds, compared with its previous offer of 1.9 billion
pounds made last week.
Shares in Balfour were trading up 3.2 percent at 255 pence
at 1548 GMT, while Carillion was down 0.2 percent at 337 pence.
Carillion's previous proposal would have given Balfour
shareholders 56.5 percent of the combined group, based on the
current undiluted ordinary share capital of each company,
Royal Bank of Canada analyst Olivia Peters said the new
proposal valued Balfour at over 300 pence a share and it made a
deal much more likely to happen.
"This is a pretty attractive offer," she said.
Carillion said its improved proposal represented a premium
of 36 percent to the one-month volume-weighted average price of
Balfour shares before July 24 - the trading day before news of
the talks between the firms first broke.
Balfour - which has endured a difficult 18 months marred by
profit warnings - has construction, engineering and facilities
management services in over 80 countries. A tie-up would expand
Carillion's international business and add breadth to its
Carillion has said a merger could save the companies more
than 175 million pounds a year by the end of 2016 by
streamlining offices, supply chains and IT.
"The latest Carillion proposal is probably as far as it
could go before its own shareholders shout stop," said Whitman
Howard analyst Stephen Rawlinson.
"We do not know whether Balfour will take the bait this time
but it's hard to see how its shareholders will not encourage the
board to re-engage," he added.
Balfour said it would consider the new offer and make a
further announcement in due course.
Carillion, which operates in Britain and Ireland, Middle
East and North Africa and Canada, had been given a deadline of
August 21 by British authorities to "put up or shut up". It
urged Balfour to request an extension so the latest offer could
($1 = 0.6015 British Pounds)
(Additional reporting by Paul Sandle and Sarah Young; editing
by Kate Holton and Pravin Char)