LONDON British construction firm Balfour Beatty (BALF.L) has reaffirmed its rejection of a second merger proposal from rival Carillion (CLLN.L), publishing the detail of its doubts over the synergies achievable from any combination.
Balfour has rejected two proposals by Carillion to create a 3 billion pounds ($5.0 billion) group better placed to compete for major international contracts against the likes of Spain's Ferrovial (FER.MC).
The two companies revealed they were in talks last month, 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.
Since then the companies have been engaged in a battle of statements and counter-statements, with Balfour continuing to argue that Carillion's proposals will fail to deliver as much value to shareholders as it can as an independent company.
Under takeover rules Carillion has until August 21 to make a final offer.
Balfour Beatty said on Friday it had further considered Thursday's announcement from Carillion, and continued to reject its suitor's assessment of potential cost savings.
"The proposal remains unchanged to that rejected on Aug. 11 2014. The board reaffirms its rejection of the proposal," Balfour said in its statement.
Balfour said it believed the proposal involved reducing its British construction revenues by up to two thirds and that that would in turn reduce the potential synergies available.
Carillion has said it could save more than 175 million pounds a year by the end of 2016, more than some analysts expected, by streamlining offices, supply chains and IT.
"Cost savings driven by shrinking the business should not be confused with synergies," Balfour said.
Balfour also said that any shrinking of its British construction business as part of a merged group would deny shareholders the benefits from a recovery in that sector, signs of which it was already seeing.
The approach from Carillion in July followed a difficult 18 months for Balfour Beatty, which has had a series of profit warnings and lost its CEO Andrew McNaughton in May. Its shares have slumped 22 percent over the last six months.
"Carillion's approach for the entire group at this stage of the construction cycle is opportunistic," Balfour said in its statement.
(Reporting by Sarah Young, editing by James Davey)