Second rebuff for Carillion

Oct 17 2007 by Iain Laing, The Journal

CONSTRUCTION and support services company Alfred McAlpine has snubbed a £584m takeover approach from rival Carillion.

McAlpine rejected the 570p a share proposal from the Wolverhampton group this week as materially undervaluing it.

The group, which is working on plans to split itself into two, said it had also thrown out a £543m indicative offer from Carillion last August. The latest acquisition move from Carillion comes after it bought another major rival, Mowlem, for £313m in February last year. London company Alfred McAlpine said the double approach failed to reflect its continuing momentum after it had lifted underlying pre-tax profits 27% to £12.7m in the first half of 2007.

But it has been a difficult year for Alfred McAlpine after it said last April the discovery of clear and systematic fraud at its slate business – which supplied products to Buckingham Palace – would cost it more than £40m in lost profits and investigation costs. The slate operation is now up for sale as part of a wider review of the group which will also see it dispose of its stakes in Private Finance Initiative (PFI) projects, as well as splitting up its support services and construction businesses.

In an update, Alfred McAlpine said it was making solid progress on restructuring and had received substantial interest from trade and financial buyers in its sale plans. The group was established in the 1930s as an offshoot of the building company started by Sir Robert McAlpine in 1869. It became a publicly listed company in the 1980s and now has no formal connection with Sir Robert, although in 2004, the two companies fought a High Court battle over Alfred McAlpine’s attempts to rebrand itself as McAlpine. Alfred McAlpine lost the legal fight.

Panmure Gordon analyst Andy Brown said he was surprised Alfred McAlpine had ended talks with Carillion. He said: “There is a logic in combining their services businesses and giving Carillion’s construction business a bit of a boost. It shows Carillion is looking at doing something else after Mowlem.”

Carillion described Alfred McAlpine as an attractive acquisition. It said: “A combination of the two companies would present an excellent strategic fit, creating a leading position in support services and integrated solutions and generating an opportunity to extract significant cost savings.”

It would consider all strategic options – including Alfred McAlpine – but there was no certainty of another approach.