Balfour Beatty has pulled out of talks with Carillion over a potential merger after a dispute over the future of Parsons Brinckerhoff.
The termination of talks follows the surprise revelation that Carillion was only interested in the firm if Parsons Brinckerhoff remained part of the Balfour Beatty group.
This was despite the firms acknowledging on Friday that PB would continue to be for sale.
In a joint statement on Friday, they said: “The two parties have agreed that Balfour Beatty’s publicly announced sale process for Parsons Brinckerhoff, which is already under way, will proceed unaffected by this announcement, subject to achieving acceptable value and terms.”
A statement from Balfour Beatty this morning said: “The termination of discussions follows Carillion’s wholly unexpected decision to only progress the possible merger in the event that Parsons Brinckerhoff remained part of the potential combined entity.”
It added: “It is also contrary to the joint announcement released on 24 July 2014, which confirmed that the sale of Parsons Brinckerhoff would be unaffected by the merger discussions and also a presentation to Balfour Beatty’s board by Carillion on 28 July 2014.
“This change in the proposed terms is not acceptable to the board of Balfour Beatty.”
Carillion has yet to comment on the shock announcement.
Analyst Liberum said: “While Balfour Beatty is prevented for bidding for Carillion, the reverse does not apply.
“Carillion can still make an offer for Balfour Beatty (with a 21 August deadline) although without Balfour Beatty’s board’s approval it would need to be a hostile bid.”
Balfour Beatty’s share price had fallen 5.5 per cent by 8.40am, while Carillion’s was down 4.4 per cent at the same point in time.
The UK’s two largest contractors by turnover announced they were in discussions over a potential merger last week.
Balfour Beatty said it will now continue with its business plan to sell Parsons Brinkerhoff, which is “well under way”.
It will also continue its search for a group chief executive, following the resignation of Andrew McNaughton in May.