Carillion has beaten a potential flurry of competitors with its £572m purchase of Alfred McAlpine, but has it paid too much?
With analysts predicting further consolidation in construction as turmoil in the financial market forces more firms to sell up, Carillion gets full marks for getting its Christmas shopping done early with its £572m takeover of Alfred McAlpine.
The move for McAlpine, confirmed today, means Carillion has got in ahead of a potential flurry of competitors who were expected to show their wares in a beauty parade after McAlpine announced back in August that it was to split its business.
Had this plan gone ahead, McAlpine’s highly valued support services business in particular was expected to attract a host of bidders. But by pitching for the whole business Carillion got in first, and is now in line to become the UK’s second largest construction firm behind Balfour Beatty, with a turnover of £4.7bn.
The turmoil in the financial markets initially seems to have played to Carillion’s advantage in the deal’s price, with the 558p a share offer announced today representing a knock down price on the 585p mooted in October. It is much closer to Carillion’s earlier – and flatly rejected – suggestion of a 560p deal; a change that chief executive John McDonough has put down to market conditions.
But in deciding whether Christmas has indeed come early for Carillion, it should be noted that the offer still represents a premium of 25p a share on Alfred McAlpine’s current share price, which like many in the sector has suffered as a result of the credit crunch.
Some analysts this morning suggested that Carillion is overpaying for the business, but the City will have short memory of this if the acquisition runs smoothly and share prices in the sector stage a recovery.
The two firms offer a good strategic fit, particularly in the support services arena, and the City will be looking to Carillion to deliver at least the £30m of synergies predicted today.