The move followed Balfour’s rejection of a sweetened offer from Carillion, revealed on Tuesday, which boosted the valuation of its target by £200 million to £2.1 billion.
Under the plan, Balfour shareholders would have held a 58.3 per cent stake in the enlarged group, up from its previous proposal of 56.5 per cent, plus an 8.5p cash dividend.
However, Balfour said the latest approach failed to address “considerable risks” associated with Carillion’s plans to “significantly reduce the scale of the UK construction business when it is poised to benefit from a recovery in the market”.
The firm was also unhappy that Carillion wanted it to call off the sale of its US consultancy arm, Parsons Brinckerhoff.
Under the City’s “put up for shut up” rules, Carillion had until this evening to make a firm offer or walk away, but yesterday said it was “no longer pursuing such a merger”. It will now be barred from making an offer for six months, unless another bidder emerges or Balfour invites it back to the negotiating table.
Carillion chairman Philip Green had argued that a tie-up would create “a world-class business and very significant value for the shareholders of both companies”.
But Balfour, led by executive chairman Steve Marshall, said the sale of Parsons Brinckerhoff was “reaching a successful conclusion” that would see up to £200m returned to its shareholders.
Recent reports have suggested that Toronto-listed engineering consultant WSP Global is in advanced talks over a possible £700m purchase of the US unit.
The planned sale had been a key stumbling block in the merger talks, and Carillion had offered to cover bidders’ “reasonable costs” of up to £10m if any deal was called off.
Balfour, which repainted the Forth Bridge, is still looking for a new chief executive after the departure of Andrew McNaughton earlier this year following a profit warning.