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Carillion is trying to bite off more than it can chew. The construction outfit is aiming to what in effect would be the acquisition of its larger rival Balfour Beatty - its much larger rival. At £8.7bn Balfour Beatty's revenues are more than double those of its suitor. Pursuing mergers for cost savings is the best possible motive and in this case Carillion thinks a combination of the two firms could free up £1.5bn in savings on a taxed and capitalised basis. Indeed, Carillion has pulled off this trick before but with smaller deals. On top of that, Carillion came nicely enough out of the crisis, after having de-risked its construction business. However, and as Warren Buffet has pointed out in the past: what happens when good management teams meet poor companies is that the latter prove decisive, says the Financial Times' Lex column.

U.S. shareholder increases stake in Carpetright to almost a fifth: Carpetright investor Franklin Templeton Institutional has increas­ed its stake in the troubled high street flooring specialist to almost 20%.

Shell sells shale sites as part of overhaul: Royal Dutch Shell has sold some of its older shale gas operations in the U.S. for £1.26billion as part of a massive restructuring programme.

Property company Zoopla is proving to be a web wonder: Property company Zoopla reported record levels of web traffic in a first trading update since floating on the stock market in June.

Hold Atkins after solid start: WS Atkins, the largest engineering group in the U.K., has started its new financial year by announcing that it will be the lead designer on the Doha metro in Qatar. The company warned that profits this year will suffer from the strength of the pound but, for long-term investors, it remains a hold for the dividend income. The engineer said it has got off to a strong start in the Middle East as the region benefits from increased infrastructure spending and a recovery in the property market. The North American business was restructured last year and the company said it expects to see the fruits of its labours this year, with improved profit margins at the half year stage ended September. Asia Pacific is trading well, having won work on the new Qindao airport in China’s Shandong province at the end of last year. The engineering group is still generating plenty of cash and ended June with £165 million on the balance sheet. The FTSE 250-listed civil engineering contractor reported net cash £40 million higher than analyst expectations at the end of March. The engineering group is focusing on becoming a more profitable business despite revenues remaining fairly flat. The low margin U.K. highways construction and maintenance division has been sold to Skanska and the group is targeting profit margins rising to 8% during the next two years, from 6.5% at the end of March. That means the company doesn’t have to deliver huge revenue growth to improve profits and returns to shareholders. Atkins made significant progress in its higher growth energy division by announcing it was preferred bidder on the Sellafield decommissioning project and design demand in the oil and gas sector remains solid. The one-in-three-year pension valuation reported a deficit of £430 million. While this increases risks for investors, crucially it won’t affect returns, as the deficit repayments have been frozen at £32 million for the next decade. Atkins is a high-quality company and Questor retains that advice, hold. WS Atkins at £13.09+9p Questor Says “Hold”.

Carillion/Balfour Beatty: hard hats: The increasingly bitter dalliance of Carillion and Balfour Beatty (billed as a merger, but it would be an acquisition of the latter by the former) shows why. The two builders have been talking on and off for months, but have started to trade barbs about the likelihood of a deal. Carillion is keen; Balfour Beatty less so. Balfour should win the argument. First, the cost savings. Carillion promises £175 million, which is 16% of the combined operating cost base. It puts the taxed and capitalised value of the savings at £1.5 billion, and although that looks a little generous, it does suggest that lots of value could be added to the combined £3.1 billion market cap. Carillion has made acquisitions before – Mowlem in 2006 and Alfred McAlpine in 2008 – so knows about integration. There is no need for Carillion to become involved with Balfour. It has done nicely enough since the crisis by taking risk out of its construction business. Its share price is up 93% since the depths of the crisis; Balfour’s is up 7%. Warren Buffett has opined on what happens when good management teams meet poor companies (the latter prove decisive). This is an unnecessary, risky pursuit of scale for its own sake. Carillion should abandon it. Lombard: Balfour’s bear necessity: Easy, Bruin. We know you’re frisky, but you could hurt someone. Services group Carillion is attempting a classic bear hug on Balfour Beatty, a struggling builder. The tactic involves forcing a target to agree its own purchase by applying pressure through investors. Bear hugs are useful when ambiguous shares are the main currency, not cold, convincing cash. On Thursday Carillion pressed the face of Steve Marshall, acting Chairman of the construction group, a little deeper in its chest fur by publishing pledges made to some shareholders. Chairman Philip Green promises cost synergies of at least £175 million by 2016. Capitalising the savings gives them a value of £1.5 billion, about half the combined value of the two companies. Fast and dirty sums show that the dividend and share ratio equate to a control premium of 24.5p or about 10% at Thursday’s closing prices. This is a slim difference to the amount Balfours expects to pay out after selling Parsons Brinckerhoff, a consultancy that Carillion wants to retain in the merged business. The tussle therefore resolves into one of Managerial competence. Carillion is a stronger business than Balfour, as illustrated by financial results reported by both companies this week. Balfour shareholders should encourage Mr Marshall to yield to the bear before it squashes him anymore.

Asda overtakes Marks and Spencer in clothing market: Asda has overtaken Marks and Spencer to become Britain’s second-biggest clothing retailer by volume, as the U.K. arm of Walmart defied the potentially damaging supermarket price war to increase its underlying sales.

U.K. home improvement market waits on deeper recovery: The revival of the U.K. housebuilding sector has boosted almost every point in the property cycle, from brickmakers supplying the raw materials, to online portals selling houses on the secondary market.

House price growth in London is set to collapse with property professionals expecting values to merely creep up by 1.9pc over the next 12 months. The capital has become accustomed to soaring house prices over the last year as pent up demand following the recession, a lack of supply and influx of cash buyers have boosted values. However, expectations of future growth have come crashing down according to the latest data from the Royal Institution of Chartered Surveyors (RICS). Back in March the nationwide group of property surveyors, who are questioned every month, predicted a 7.4pc rise in London house prices in the following 12 months. This has forecast slid to 1.9pc in July for the next year due to stretched affordability leading to a fall in demand

Thousands of British construction jobs could be lost if Balfour Beatty was to accept Carillion's proposed merger offer to create a 3 billion pound ($5 billion) giant, the Times reported on Thursday, citing sources. Balfour's Executive Chairman Steve Marshall and Carillion CEO Richard Howson had a fundamental falling out over the future size and shape of Balfour's UK construction arm, the daily said, without plainly stating who its sources were. (Reuters)

Chiquita, the US banana producer, has rejected this week’s $1.25bn takeover offer from two of Brazil’s wealthiest families, turning the banana wars into a potentially bitter battle. The food producer turned down the bold all-cash bid from Brazil’s Safra and Cutrale groups on Thursday, saying that it intended to stick to its original plan of merging with Ireland’s Fyffes. (Financial Times)

The housing market "paused for a breath" across the UK in July and went into reverse in London, surveyors have said. Demand for UK homes fell for the first time since the start of last year whilst sales fell more sharply in London than anywhere else.

Hold RM2 International: Pallet manufacturing company RM2 International has high-profile Directors in former Diageo Chief Paul Walsh and ex-Marks & Spencer Boss Sir Stuart Rose on the board. And more recently it added one of Britain’s best-known value investors to its shareholder register in Neil Woodford. Questor thinks it is time to take a closer look. The pallet manufacturer expanded its capacity in Canada in May and broker Cenkos expects pallet production to increase rapidly in the coming months. It will initially focus on the U.S. market where 2.3 billion pallets are used a year, before expanding into Europe. About 85% of the business is renting pallets to customers such as Unilever. Digging a little deeper into the numbers it looks like the majority of the loss in 2013 came from a $40 million payment to settle warrants that were issued to private equity investors. The company has had a troubled life since flotation. Shares closed at 101p on the first day’s trading in January, but had slumped to 54p by the time of the annual results on June 16. Questor is cautious on the outlook until the company moves into profits. Questor previously recommended selling the shares due to the debt levels, however the debt was retired following the flotation on aim leaving the group debt free to expand operations and the recommendation moved to a hold. RM2 International at 76¼p-½p. Questor Says “Hold”.

Boom time for car dealers as cheap credit boosts sales: Car dealers across the U.K. are enjoying a boom in sales and profits as cheap credit on new cars and a wave of fuel-efficient new models feeds demand.

Roaring foretaste: Batten down the hatches. Admiral is sailing through squally weather. The insurer is celebrated for its ability to make profits in the over-competitive U.K. motor clover. But worries about capital and the sustainability of earnings have left it wallowing in heavy seas. Net U.K. premiums dropped 9% to £198 million in the first half. Profits were flat. Admiral raised £200 million through a bond issue last month. This should underwrite the group’s generous dividend policy for a while. But weak premiums would present a challenge to payouts if reserve releases falter. They totalled £38 million in the first half. Meanwhile, “other income”, which has always accounted for a big chunk of Admiral’s earnings, has settled at £71 million. This ragbag includes fees for referring drivers to car hire businesses when their own rides are out of action. Admiral has shown an impressive ability to prosper in the tough motor market. Now even Mr Engelhardt’s command is tacking hard against the wind. The group should maintain its premium rating. But the whole sector is adrift.

ustralian banks: great borrower grief: Australia has not been in recession for 23 years. Stock in Commonwealth Bank of Australia changes hands at pricey 15 times forward earnings, with a market capitalisation of $122 billion. Joblessness is at a 12-year high. One of these numbers jars with the others. Perhaps the holders of the shares in CBA do not mind. They own a big bank – provider of a quarter of Australians’ home loans, credit cards and retail deposits – in a market dominated by four big lenders. And CBA did not egregiously fritter away shareholders’ money when times were good. Return on equity was over 18% for the year ending in June, according to results on Wednesday. There is also the dividend yield, at 5%, to fixate local shareholders (the dividend payments also come with franking credits which reduce income tax paid in Australia). Yet times are not so good any more, given that unemployment rate and the effects it will have upon credit demand. When the economy sours even owning a large, yieldy bank is, ultimately, still owning a bank whose earnings depend on credit growth.

Contract wins help G4S stage comeback The world’s biggest security company wins £1.2bn of new work in the first half amid an overhaul after being shaken by a series of scandals

Crown Estate launches venture with Gingko Tree, the investment arm of Beijing’s foreign exchange regulator, to buy a 50 per cent stake in Fosse Park

US banana group slips out of Irish hands Fyffes’ shares tumble after Cutrale, the Brazilian orange producer, and Joseph Safra, the billionaire banker, make $611m counter-offer for US group

London Central Portfolio plays down slowing property growth: A leading property asset Manager and expert on central London property has dismissed concerns over slowing growth, after new figures reveal growing appetite in the capital’s luxury housing market.