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At 3:07 pm London time today, Carillion (LSE:CLLN) renewed its wooing of Balfour Beatty (LSE:BBY). At 3:25 pm, Balfour Beatty’s board responded that it “notes” the Carillion proposal, will consider it, and will make a public response “in due course.” Both Carillion’s share price and Balfour Beatty’s share price responded to the dual announcements, just as they have to similar reports over the past five weeks.
Carillion shares opened at 339.20, up from yesterday’s close of 337.40. Eventually its shares closed at 336.70, down on the day by 0.21%. That, however, does not tell the tale. Three times during the day, the share price had reached or topped 342.60. The last it was at that level was at 2:46. However, within minutes of the price began a dive that bottomed out at 335.30 at 3:34 pm. Oddly, as the shares had fallen to 338.50 at 3:23 and had begun what looked like a turnaround, the clock struck 3:25 and the Balfour response was released, prompting the further decline.
Meanwhile Balfour shares, which had been humming along between 245.0 and 250.00 during most of the day, also took a couple of dramatic afternoon turns. Watch the timing:
- At 3:07 BBY went from 246.40 to 254.00.
- By 3:08, just one minute after the CLLN release, it reached 255.10.
- It continued in that vicinity until Balfour’s response at 3:25, when it once again skyrocketed to 262.40.
Take it for what you will, but there is some significant shareholder interest implied in that reactive pricing.
Carillion noted in its announcement that it had been conducting talks with some of BBY’s major shareholders. This is the same, and somewhat traditional, tactic that AbbVie (NYSE:ABBV) used recently to woo Shire (LSE:SHP). Previously, Balfour had said that the proposal from Carillion was “not in the best interests of Balfour Beatty shareholders” and it list numerous reasons why. Today’s proposal contains specific responses to BBY’s itemized objections.
Essentially, the improved proposal is a:
- 30% premium on the 24 July closing price
- 22% premium on the 18 July closing price
- 36% premium on the one-month Volume-Weighted Average Price prior to 24 July
Other significant details include:
- A willingness to reimburse up to £10 billion in reasonable bidder’s cost if Balfour’s divestiture of Parsons Brinckerhoff fails as a result of the subject talks.
- Three Balfour non-executive directors would join the Carillion board
- The senior management team would be comprised of parties from both companies.
- An increase from 56.5% share to 58.268% for Balfour shareholders
- A cash dividend of 8.5 pence per share
There is no doubt that the offer is sweeter, but it remains to be seen if the Balfour board is any more interested than it has been prior to today.
Whether it is the anticipation or a merger or the Balfour faithful believing in the company’s own plan, it is interesting to note that BBY is running ahead of its 200 day moving average (and was before today). Carillion, on the other hand is running below its.
