Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Balfour springs Birse buy shock

Acquisitive contractor snaps up regional civils rm and eyes south-west for next target

BALFOUR Beatty has embarked on a campaign to buy regional contractors with a surprise £32 million offer for Birse this week.

The company has a £300 million war chest to spend on acquisitions following a strategic decision last year to expand its regional operation.

Birse directors have recommended the 16.6p a share cash approach and Balfour Beatty has begun four weeks of due diligence.

A spokesman said: 'Our plans to expand our regional business were why we were interested in buying Mowlem. Although Birse is not quite the size of Mowlem, it does increase our coverage.'

Balfour Beatty lost out to Carillion in its bid for Mowlem in February. But the company said it would look at further acquisitions in Wales and south-west England to complete its coverage.

The spokesman added: 'We're basically buying the civil engineering business.

We're very strong in Scotland, for example, but there is hardly any overlap with Birse because it gives a presence in parts of the north, and especially the Midlands, where we didn't particularly have anything.

'The only areas now where we don't have the flag on the map are Wales and the south-west.'

Doncaster-based Birse's civil engineering business will be combined with Balfour Beatty to create a £750 million-turnover operation with a £1.5 billion order book.

Balfour Beatty will benefit from Birse's railways civil engineering framework contracts with Network Rail, as well as coastal defence work for local authorities.

Both firms work for the Highways Agency, but Balfour Beatty concentrates on major projects while Birse tenders jobs up to around £20 million.

Birse managing director Martin Budden will stay with the firm, although chairman Peter Watson is likely to leave.

The company, which has 1,200 staff across 10 regional offices, has established a profitable civil engineering business but is looking for a sale following a series of problem contracts at its building business.

In recent years the division posted heavy losses on litigious contracts for a data centre for Citibank in south London and the Priory Meadow shopping centre in Hastings, Kent.

The company said in its interim results last October that it would eliminate losses from the division by April 2007.

But the prospect of more heavy provisions in this year's results, high debt levels and the potential difficulty of winning more work encouraged directors to seek the financial backing of a larger company.

Mr Budden said: 'We went into building in the early '90s in a negative way and there was not much work around.

We could never attract the best builders because we were seen as a civils firm.'

Birse's one remaining building operation, a £20 millionturnover business concentrating on education work in northern England, will become part of Balfour's regional construction business, Mansell.