Carillion Plc Regulatory News (CLLN)

THIS ANNOUNCEMENT IS NOT AN ANNOUNCEMENT OF A FIRM INTENTION TO UNDERTAKE ANY TRANSACTION UNDER RULE 2.7 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE") AND THERE CAN BE NO CERTAINTY THAT ANY TRANSACTION WILL PROCEED, OR AS TO THE TERMS OF ANY SUCH TRANSACTION.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION.

FOR IMMEDIATE RELEASE 19 August 2014

Carillion offers Balfour Beatty Shareholders a 36% premium

Key Highlights

· Following discussions with Balfour Beatty's major shareholders, Carillion announces that it has today put an improved merger proposal to Balfour Beatty. Carillion hopes that, on the basis of these improved terms, the Board of Balfour Beatty will now re-engage in discussions and extend the PUSU deadline.

- 58.268% share for Balfour Beatty shareholders based on the current undiluted ordinary share capital of each of Balfour Beatty and Carillion, as well as a cash dividend (or equivalent) of 8.5 pence per Balfour Beatty share (£59 million in total). This values Balfour Beatty at £2,086 million1

- Balfour Beatty had previously agreed to a 56.5% share for Balfour Beatty shareholders based on the current undiluted ordinary share capital of each of Balfour Beatty and Carillion, worth £1,886 million1

- Carillion's improved proposal announced today represents a premium of 36% to the 1 month Volume Weighted Average Price prior to 24 July 2014 (the trading day immediately preceding the joint leak announcement)

· The Board of Carillion continues to believe in the powerful strategic logic of a merger with Balfour Beatty and that, as a direct result of the merger, the cost-base of the combined group could be reduced by at least £175 million per annum by the end of 20162, that earnings would consequently be significantly enhanced from that year3 and that these cost savings would represent a capitalised value of over £1.5 billion before any re-rating4.

· Since its announcement on 14 August 2014, Carillion has continued discussions with Balfour Beatty's major shareholders. Carillion believes that the revised proposal provides a compelling case for the Board of Balfour Beatty to request the Panel on Takeovers and Mergers to extend the PUSU deadline and to resume discussions with Carillion, particularly when seen in the light of Balfour Beatty's proposal to continue on a standalone basis, including the possibility of a return of capital to Balfour Beatty shareholders of up to £200 million.

Philip Green, Chairman of Carillion said "Given the scale of the prize for shareholders of both Balfour Beatty and Carillion from a merger of the two companies, the Board of Carillion remains committed to moving forward in a constructive and collaborative way with the Board and management of Balfour Beatty to create a world-class business and very significant value for the shareholders of both companies".

PUSU Extension

The deadline imposed by the Panel on Takeovers and Mergers for Carillion to announce a firm offer, or to announce that it does not intend to make a firm offer, is currently 5:00pm this Thursday 21 August 2014. In order for discussions to continue and for mutual due diligence to be concluded, Balfour Beatty must request that the Panel on Takeovers and Mergers extend this deadline.

From the time of full re-engagement by Balfour Beatty, Carillion expects to be in a position to announce a firm offer for Balfour Beatty within four weeks.

The Proposed Offer

Carillion's revised proposal is as follows:

· All-share merger of Carillion and Balfour Beatty;

· 58.268% share for Balfour Beatty shareholders based on the current undiluted ordinary share capital of each of Balfour Beatty and Carillion;

· In addition to the interim dividend announced by Balfour Beatty last week and to the 2014 final dividend to which shareholders of the combined group would be entitled, Balfour Beatty shareholders to receive an additional cash dividend or equivalent of 8.5 pence per Balfour Beatty share (£59 million in total);

· Leadership team of Richard Howson, CEO; Richard Adam, CFO; and Philip Green, Chairman;

· Three Balfour Beatty non-executive directors to join the Board;

· Enlarged group to maintain Carillion's progressive dividend policy;

· Senior management team below board level to be drawn from both companies; and

· Remaining Parsons Brinckerhoff bidders' reasonable costs to be covered by Carillion in the event the merger goes ahead (up to £10 million in aggregate).

Premium

Carillion's improved offer represents a premium of:

· 36% to the 1 month Volume Weighted Average Price prior to 24 July 2014, the trading day immediately preceding the joint leak announcement;

· 30% to the closing share price on 24 July 2014; and

· 22% to the closing share price on 18 August 2014.

Parsons Brinckerhoff

Carillion has repeated to Balfour Beatty that it is willing to allow it to continue with its Parsons Brinckerhoff auction process, and to enter into a contract for a sale of Parsons Brinckerhoff subject to shareholder approval. However, should the merger proceed, Carillion would expect the disposal of Parsons Brinckerhoff not to be completed.

Carillion is willing to reimburse the remaining Parsons Brinckerhoff bidders' reasonable costs (up to £10 million in aggregate) from the date that discussions with Balfour Beatty resume, in the event that the merger goes ahead and Parsons Brinckerhoff is not sold.

Carillion will make a further announcement in due course. In the meantime, there can be no certainty that any offer will be made by Carillion or as to the terms on which any such offer might be made.

The Board of Carillion would only proceed with a merger if, inter alia (i) due diligence were concluded to its satisfaction; and (ii) the Boards of Carillion and Balfour Beatty were to recommend a merger to their shareholders. In accordance with Rule 2.5(c)(i) of the Code, Carillion confirms that these pre-conditions must be satisfied prior to the agreement of any transaction.

Carillion reserves the right to introduce other forms of consideration and/or to vary the mix of consideration.

In addition, Carillion reserves the right to make an offer for Balfour Beatty at any time on less favourable terms:

i. with the agreement or recommendation of the Board of Balfour Beatty;

ii. if, otherwise than in the ordinary course, Balfour Beatty declares, makes or pays any dividend or other return of capital to its shareholders;

iii. if a third party announces a firm intention to make an offer for Balfour Beatty on less favourable terms; or

iv. following the announcement by Balfour Beatty of a whitewash transaction pursuant to the Code.

As required by Rule 2.6(a) of the Code, Carillion is required, by not later than 5.00 p.m. on 21 August 2014, to either announce a firm intention to undertake a transaction in accordance with Rule 2.7 of the Code or announce that it does not intend to undertake a transaction, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline may be extended with the consent of the Takeover Panel in accordance with Rule 2.6(c) of the Code. Carillion understands that, in accordance with Rule 2.6(c), the Takeover Panel will take into account the views of Balfour Beatty in considering whether to grant such an extension.

This announcement is not being made with the consent of Balfour Beatty.

Enquiries:

CarillionJohn Denning, Director Group Corporate Affairs +44 (0) 1902 316 426

Lazard & Co., Limited (Lead Financial Adviser) +44 (0) 20 7187 2000

Nicholas Shott

Vasco Litchfield

Cyrus Kapadia

Greenhill & Co. International LLP (Financial Adviser) +44 (0) 20 7198 7400

Anthony Parsons

Alex Usher-Smith

HSBC Bank plc (Financial Adviser) +44 (0) 20 7991 8888

Charles Packshaw

Morgan Stanley & Co. International plc (Joint Corporate Broker)Peter Moorhouse +44 (0) 20 7425 8000

Oriel Securities (Joint Corporate Broker)David Arch +44 (0) 20 7710 7600

Finsbury (PR Adviser)James Murgatroyd +44 (0) 20 7251 3801Gordon Simpson

Important Notices

This announcement is not intended to and does not constitute or form part of any offer to sell or subscribe for or any invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction.

Lazard & Co., Limited ("Lazard"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as lead financial adviser to Carillion plc ("Carillion") and no one else in connection with the possible transaction and will not be responsible to anyone other than Carillion for providing the protections afforded to clients of Lazard & Co., Limited nor for providing advice in relation to the possible transaction or any other matters referred to in this announcement. Neither Lazard & Co., Limited nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard & Co., Limited in connection with this announcement, any statement contained herein, the possible transaction or otherwise.

Greenhill & Co. International LLP ("Greenhill"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as financial adviser to Carillion and no one else in connection with the possible transaction and will not be responsible to anyone other than Carillion for providing the protections afforded to clients of Greenhill & Co. International LLP nor for providing advice in relation to the possible transaction or any other matters referred to in this announcement. Neither Greenhill & Co. International LLP nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Greenhill & Co. International LLP in connection with this announcement, any statement contained herein, the possible transaction or otherwise.

Morgan Stanley & Co. International plc, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as joint corporate broker to Carillion, and no one else in connection with the matters referred to in this announcement. In connection with such matters, Morgan Stanley & Co. International plc, its affiliates and its and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to any other person other than Carillion for providing the protections afforded to their clients or for providing advice in connection with the contents of this announcement or any other matter referred to herein.

Oriel Securities Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting as joint corporate broker to Carillion, and no one else in connection with the matters referred to in this announcement. In connection with such matters, Oriel Securities Limited, its affiliates and its and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to any other person other than Carillion for providing the protections afforded to their clients or for providing advice in connection with the contents of this announcement or any other matter referred to herein.

HSBC Bank plc ("HSBC"), which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority, is acting as financial adviser to Carillion and no one else in connection with the possible transaction and will not be responsible to anyone other than Carillion for providing the protections afforded to clients of HSBC Bank plc nor for providing advice in relation to the possible transaction or any other matters referred to in this announcement.

Cautionary Note Regarding Forward-Looking Statements

This announcement contains certain forward-looking statements with respect to the financial condition, results of operations and business of Carillion and Balfour Beatty and the combined group. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "hope", "aims", "continue", "will", "may", "should", "would", "could", or other words of similar meaning. Forward looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of Carillion's or Balfour Beatty's operations and potential synergies resulting from the transaction; and (iii) the effects of government regulation on Carillion's or Balfour Beatty's business. These statements are based on assumptions and assessments made by Carillion, in light of their experience and their perception of historical trends, current conditions, future developments and other factors they believe appropriate.

By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this document could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. They are also based upon assumptions. Many factors may cause the actual results, performance or achievements of Carillion to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause actual results, performance or achievements of Carillion to differ materially from the expectations of Carillion, include, among other things, general business and economic conditions globally, industry trends, competition, changes in government and other regulation, changes in political and economic stability, disruptions in business operations due to reorganisation activities, tax rates, interest rate and currency fluctuations, the failure to satisfy any conditions for the merger on a timely basis or at all, the failure to satisfy the conditions of any merger if and when implemented (including approvals or clearances from regulatory and other agencies and bodies) on a timely basis or at all, the failure of Carillion to combine with Balfour Beatty on a timely basis or at all, the inability of the combined group to realise successfully any anticipated synergies or cost reductions if and when the merger is implemented, the inability of the combined group to integrate successfully Carillion and Balfour Beatty's operations and programmes if and when the merger is implemented, the combined group incurring and/or experiencing unanticipated costs and/or delays or difficulties relating to the merger when the merger is implemented. Such forward-looking statements should therefore be construed in light of such factors.

Neither Carillion, nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

Carillion does not assume any obligation to update or correct the information contained in this document (whether as a result of new information, future events or otherwise), except as required by applicable law.

No Profit Forecasts Or Estimates

No statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings or earnings per share for Carillion or the combined group, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for Carillion, as appropriate.

Rounding

Certain figures included in this announcement have been subjected to rounding adjustments.

Publication On Website

A copy of this announcement will be available, subject to certain restrictions relating to persons resident in restricted jurisdictions, for inspection on Carillion's website by no later than 12 noon (London time) on the day following this announcement. For the avoidance of doubt, the contents of such website are not incorporated into and do not form part of this announcement.

THIS ANNOUNCEMENT IS NOT AN OFFER TO BUY BALFOUR BEATTY SECURITIES OR AN INVITATION TO SELL CARILLION SECURITIES IN ANY JURISDICTION. THE CARILLION SHARES ARE NOT, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD WITHOUT AN APPLICABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT OF 1933.

APPENDIX ISOURCES AND BASES

· Unless otherwise stated, financial and other information concerning Carillion and Balfour Beatty has been extracted from publicly available sources or from Carillion's management sources (in respect of information relating to Carillion).

· The figure set out in respect of the proposed aggregate value of the additional cash dividend (or equivalent) for Balfour Beatty shareholders has been calculated by multiplying the amount per Balfour Beatty share by the announced number of Balfour Beatty shares in issue as at 18 August 2014 of 689,500,514 ordinary shares.

· The figure set out for the capitalised value of cost savings of at least £1.5 billion is based on £175 million of cost savings taxed at the 2014 UK corporate tax rate of 21 per cent. and capitalised at the Last Twelve Month ("LTM") market capitalisation weighted price to earnings multiple of 11.7 times. The LTM price to earnings multiple for each of Balfour Beatty and Carillion is calculated by dividing their respective share prices as at close of business on 24 July 2014 (sourced from FactSet) by their respective underlying earnings per share for the 12 month period to June 2014 ("LTM underlying earnings per share"). The LTM underlying earnings per share is calculated as the sum of the underlying earnings per share in H2 2013 and H1 2014. H2 2013 underlying earnings per share is calculated as full year 2013 underlying earnings per share less H1 2013 underlying earnings per share. The underlying earnings per share information is sourced from the respective company's 2013 annual accounts and their 2013 and 2014 half year results. The implied price to earnings multiples of Balfour Beatty and Carillion are then weighted by their respective market capitalisations (as at close of business on 24 July 2014) to derive the LTM market capitalisation weighted price to earnings multiple of 11.7 times. This calculation is based on historical earnings per share in order that this statement is not construed as a profit forecast under the rules of the Code.

· The offer values are calculated as follows:

- Under the offer terms announced by Carillion on 14 August 2014, the offer exchange ratio of 0.8104946 new Carillion shares per Balfour Beatty share would result in 558,836,472 new Carillion shares being issued. Based on Carillion's closing share price as at 18 August 2014 of 337.4p (sourced from Factset), the implied value of these shares is £1,886 million;

- Under the revised offer terms announced today, the offer exchange ratio of 0.8712682 new Carillion shares per Balfour Beatty share would result in 600,739,881 new Carillion shares being issued. Based on Carillion's closing share price as at 18 August 2014 of 337.4p (sourced from Factset), the implied value of these shares is £2,027 million. Adding the value of the £59 million additional cash dividend or equivalent to the value of the shares offered implies a total equity value offered for Balfour Beatty of £2,086 million;

- Any comparison of the previous and revised offer values on this basis does not take into account the possible dilutive effect of the new Carillion shares issued as part of the improved offer.

· The share of the undiluted ordinary equity in the combined group is based on each of Balfour Beatty and Carillion paying their respective proposed 2014 interim dividend.

· The offer premia referenced in the announcement are calculated as follows:

- Offer exchange ratio of 0.8712682 new Carillion shares per Balfour Beatty share (valued at 294.0 pence per Balfour Beatty share on the basis of Carillion's closing share price as at 18 August 2014), plus 8.5 pence in cash per Balfour Beatty share, equivalent to an offer price of 302.5 pence per Balfour Beatty share;

- This represents a premium of 36% to the volume-weighted average price of 222.8p per Balfour Beatty share (sourced from Factset) for the period between 25 June 2014 and 24 July 2014 inclusive;

- This represents a premium of 30% to the share price of 232.1p per Balfour Beatty share as at market close on 24 July 2014 (sourced from Factset); and

- This represents a premium of 22% to the share price of 248.0p per Balfour Beatty share as at market close on 18 August 2014 (sourced from Factset).

1 Offer value is calculated based on Carillion's closing share price on 18 August 2014. See Appendix I for the full calculation

2 Statement made on the basis of publicly available Balfour Beatty information. The basis of these savings are detailed in Carillion's 14 August 2014 announcement in Appendices I and III3 This statement is not a profit forecast

4 Calculated using weighted LTM multiple applied to cost-base reduction achieved by the end of 2016. See Appendix I