Canadian firm set to swoop in for Balfour Beatty arm as Carillion talks stall again

Canadian engineering consultancy WSP Global has moved to acquire a Balfour Beatty division Parsons Brinckerhoff, which has been the sticking point in merger talks with rival Carillion.

An agreement to sell Parsons Brinckerhoff, which has helped to design and build more than a dozen schools in Newcastle, would deal a serious blow to Carillion’s hopes of sealing a merger that would create a FTSE-100 construction and services group.

Parsons Brinckerhoff is a wholly owned New York-based subsidiary of Balfour Beatty, after it was acquired in 2009 by the construction giant and also has bases in Yorkshire and the North East.

Talks with Carillion have stalled for the third time after heated exchanges on the LSE, and the firm is still deciding whether to extend a £3 billion merger proposal.

Balfour Beatty accused Carillion of reversing its position on the sale of Parsons Brinckerhoff on the basis that its cashflows would be important to the combined group as they completed a merger.

Sky News revealed that WSP Global Inc is in talks to buy the division for about £717 million, although several private equity firms including New Mountain Capital have apparently expressed an interest in Parsons Brinckerhoff

WSP was a listed UK-based engineering group which agreed to be bought by Genivar, a Canadian rival, in 2012. The combined group then rebranded under the WSP name last year.

Balfour Beatty has issued a string of profit warnings this year, resulting in the ousting of its chief executive.

Carillion has until Thursday to persuade Balfour Beatty to return to the negotiating table or make a formal offer without the agreement of its prospective merger partner.

Reports have suggested that Carillion was contemplating a last-ditch sweetener, possibly by increasing the proportion of the combined group which would be owned by Balfour Beatty’s shareholders, or by enhancing a dividend payout to them.