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Balfour Beatty is on the verge of a major acquisition believed to be in the US which will see it go to shareholders to raise around £350 million via a rights issue.
The British construction giant, possibly the best known UK company in the sector with major contracts like the continual roadworks on the M25 London orbital, has already signalled its expansion plans in North America.
After strategic acquisitions over the last 15 months in California and in the south east of the US, America now makes up 30% of Balfour's revenues, and chief executive Ian Tyler has made "growing our business presence in the US" his most prominent goal.
The plan is for Balfour to take advantage of President Barack Obama's huge stimulus plans to drag the US out of recession at a time when the asset values of American companies are at historical lows, and ripe for the picking.
Only last month Balfour reported it had landed a $415 million road-building project in Texas.
Today the company was keeping tight-lipped over the identity of the acquisition target, but admitted the deal and the fund-raising plans are close at hand.
"Balfour Beatty confirms it is in advanced discussions regarding a significant and complementary acquisition which would materially accelerate the fulfilment of its existing strategy," the company said in a statement to the Stock Exchange
"If the acquisition proceeds, it is expected that it would be substantially funded by a rights issue," it added. It is understood an announcement on the deal could come as early as the end of this week.
In the City, it is understood JP Morgan Cazenove and Royal Bank of Scotland's broking house Hoare Govett have been appointed to run the rights issue.
The company, which has just been relegated from the FTSE 100 after it failed to keep up with the wider surge in shares over the summer, has a market capitalisation of £1.7 billion.
Today's its shares were 3p stronger at 347¼p.
Balfour however also appears to be never far from controversy.
In 2008 alone it was part of the failed Metronet Underground consortium; it was also named among firms under investigation in the Midlands for ripping off councils; and it paid fines to the Serious Fraud Office over bribes in Egypt.
Reader views (1)
This industry cannot bring our economy to the edge of disaster the way the banking sector has done, but given the billions of taxpayers money expended and wastage through over-paying or inefficiency that allegedly occurs, it needs much greater scrutiny and tighter regulation from Govt.
For example, one of the UK infrastructure sector's largest clients, TfL, has awarded additional major billion pound contracts to Balfour Beatty and Bechtel having heavily criticised their respective past performance on Metronet and Tubelines during the past few years.
The issue to be investigated by Govt depts surely is, if Tfl are correct and significant wastage of taxpayers money has/will be incurred by these companies, why is TfL subsequently awarding additional billion pound contracts and risking significantly more taxpayers money, given the summs of money involved are comparable to some of the losses banks incurred (which taxpayers are bailing out).
With proper investigation by Govt, taxpayers may discover that banking is not the only industry where strategic risk management processes are inadequate and that relationship are in some areas too cosy, given the very large sums of taxpayers money involved.
- Mike, London
