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Alfred McAlpine name could go in Carillion bid

Due diligence under way for probable December completion to meet offer deadline

The fate of one of the oldest names in construction could be decided by the New Year if Carillion presses ahead with its £600 million offer for Alfred McAlpine.

Carillion has indicated that due diligence on Alfred McAlpine is expected to take “weeks not months”.

And City observers expect it to be finished by the first week of December - with a firm offer shortly afterwards.

Kaupthing Bank construction analyst Kevin Cammack said: “At present two big McAlpine shareholders have made binding offers to sell their 15 per cent stake to Carillion. But those offers lapse on 14 December, so you’d expect Carillion to finish due diligence before then.

“What they do next will depend on whether they find any rotten apples - and whether those apples are just bruised, or rotten to the core. But I think they’d have to find something extraordinary to walk away from it now.”

Carillion’s corporate affairs director John Denning played down the prospect of major job losses.

He said: “The biggest factor hindering construction growth is the presence of good people,” he said. “Carillion is -recruiting thousands of people a year. We like to think this is a great opportunity. We want to retain these people to help us grow our business.”

But McAlpine insiders said they expected an exodus of senior management and board members. One said: “Most of the board will go, although they might hang on to people in support services. I don’t expect to see too many other redundancies.”

Another insider said staff were now just keen to find out about their fates.

“The mood at the company is okay,” he said. “We are getting on with business while we wait to find out what the score is. At the end of the day Carillion isn’t going to spend £600 million just to cock it up.”

The McAlpine name has been tipped to disappear with the sale. But a Carillion spokesman said a decision still had to be made on the issue.

Carillion will pay 585 pence for each McAlpine share, 25 per cent in cash and 75 per cent in newly issued Carillion shares. It has previously had 560p and 570p offers rejected.

Post-war boom fuelled growth

  • Formed in the 1930s by the fourth son of Sir Robert McAlpine.

  • Grew in the 1950s as it rebuilt runways, harbours and roads after WWII.

  • Floated in the ’80s.

  • Rocked by controversy in recent years, including a battle with Sir Robert McAlpine over plans to change its name, and fraud in its slate business.

  • Plans to demerge into two divisions announced earlier this year led to City speculation it would face a takeover bid.

  • Rejected earlier Carillion offers of 560p and 570p per share.

Analysis: Diplomacy works for skillful bidder

By Bill Fishlock

Alfred McAlpine dismissed Carillion’s 570p a share indicative offer last month as materially undervaluing the company but in the end the price needed to be raised by less than 3 per cent to secure agreement.

With shareholders controlling 15 per cent happy to sell at 570p, McAlpine would have struggled to reject the offer of 585p.

By seeming to rule out a hostile bid and winning the support of major McAlpine shareholders, Carillion appears to have played a successful diplomatic game. It may be paying a full price - around 17 times McAlpine’s expected 2008 earnings - but disposals should offset this.

Carillion will secure some useful new support services clients, around £1.1 billion of turnover and, if it chooses to use it, a historic brand.

The deal highlights continuing bid interest in the sector and may help provide a floor under share prices if trading conditions do get tougher.