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Spotlight: Balfour Beatty


'SURPRISE' was the word most used to describe Balfour Beatty's £32 million acquisition of Birse.

The first in Balfour's planned series of acquisitions comes at a price of 16.6p per Birse share.

The £32 million price tag for Birse is more than £6 million up on the closing price before the deal was unveiled, which certainly looks a lot given that the shares have doubled since 2001.

Back then Birse was an even more unlikely bid candidate, with skeletons routinely toppling out of its cupboard.

Group managing director Martin Budden, who will go after the deal goes through, has produced a decent deal for shareholders that bought the stock at 8p - even if it has taken time - but is it value for Balfour's shareholders?

Birse made a £2.3 million operating profit on £149.8 million turnover in the six months to October 2005, with virtually all that profit coming from the £125 million turnover civils business.

Building, process and plant generated £235,000 in operating profits between them and do not figure in Balfour's justification for the deal.

Strength in regional civils is the reason for buying Birse but Balfour already has a strong civils presence with one of the UK's most successful road maintenance businesses in Raynesway.

Balfour must be convinced that Birse's thriving civils operation can add something in terms of skills and clients to its own business, otherwise £32 million looks like a lot of money merely to expand its regional presence.