The City is banking on Carillion to return to the fray with an offer of more than £620m for Alfred McAlpine after it emerged this week that two bids had been rejected.

It is understood that Morgan Sindall and Balfour Beatty, mentioned by analysts as rival bidders for the contractor, have ruled themselves out.

Galliford Try, another potential bidder, is also not thought currently to be looking at the firm, which would leave the way clear for Carillion or a private equity bidder.

McAlpine this week rejected a £584m approach from Carillion insisting it “materially undervalued” the company.

McAlpine also revealed it had rejected a £574m bid from Carillion in August. McAlpine’s market capitalisation is about £565m.

Carillion’s shares fell 7% after the announcement, an indication that the City believes it will continue to pursue McAlpine. The takeover talks began after Alfred McAlpine disclosed a plan to split the business into two: business and infrastructure services, and project services.

One City source said: “An offer of about 600p is likely to seal a deal. That price gives a certainty over the potential of the demerger plan.”

A Carillion spokesperson said: “Alfred McAlpine would represent an attractive acquisition and a combination of the two companies would present an excellent strategic fit.”

However, City sources have raised questions over Carillion’s ability to integrate the firm so soon after its acquisition of Mowlem, which involved a £135m hit on problem contracts.

McAlpine insisted its “strong recent results” vindicated the decision to reject the offer from Carillion.

How the two companies match up


Turnover £3.6bn
2006 profit £82.1m
Market cap £1.1bn

Alfred McAlpine

Turnover £1.1bn
2006 profit £18.7m
Market cap £565m