Support from Audley could force McAlpine to open its books

The takeover battle for Alfred McAlpine took a further twist this week after it emerged that the firm could be forced to open its books to Carillion, its potential purchaser, within weeks.

It is understood that the move may be triggered by a change of heart on the part of one of McAlpine’s most supportive shareholders. If so, it would effectively rule out the hostile bid that has been mooted over the past few days.

Ian Grice

Audley Capital, which has a 5% stake in McAlpine, said it was “considering its options” after holding discussions with Carillion. Audley had previously insisted that it would not consider any offer under 600p a share, 30p more than has been offered by Carillion.

This would tip the scales towards formal talks, allowing Carillion to carry out due diligence on a deal that would create the UK’s second largest contractor.

Audley has a 5% stake in McAlpine and if it came out in support of a Carillion bid, it would mean more than 20% of the biggest shareholders were in favour of a deal. This would force McAlpine to take the bid seriously and allow Carillion to check its accounts.

City institutions Standard Life, Schroders and New Star, which own for about 15% of McAlpine’s shares, have thrown their weight behind Carillion. Schroders and Standard Life are also shareholders in Carillion, which has added to the pressure on McAlpine, and reduced the likelihood of a hostile bid.

More than half (52%) of Carillion’s shareholders own McAlpine stock and 38% of McAlpine shareholders own Carillion stock. Joe Brent, an analyst at Citigroup, said of this overlap: “The high commonality of ownership suggests that if Carillion shareholders want a deal they will get one.”

Audley is understood to be impressed with Carillion’s management and the potential from a takeover.

An insider said: “One of the things that impressed them was the way Carillion centralised control of Mowlem [which it took over in March 2006]. If they can do that with McAlpine and streamline its operations there are obvious benefits.”

Few in the City believe McAlpine will survive to bring in the demerger strategy it outlined earlier this month. Many also believe the shareholder “commonality” will result in a bid price below the 600p suggested in the City last week.

But Brent added that Carillion might need to provide details of cost savings or increase the cash component to make it more attractive to McAlpine shareholders.

Some shareholders in McAlpine have expressed frustration at the cross-holdings of institutional investors, which are pressing for a deal at the offer price.

Although most of the potential UK bidders ruled themselves out last week, German contractor Hochtief declined to comment.

A private equity bid is seen as unlikely in the City.