UK contractor to buy Parsons Brinckerhoff Sep 2009
- After months of making its availability known, Parsons Brinckerhoff has found a buyer in UK contractor Balfour Beatty. The negotiated purchase price of US$626 (about £380) million will render Parsons Brinckerhoff (PB) a wholly owned subsidiary of Balfour Beatty.
- In explaining this rare and intriguing move, PB CEO Keith Hawksworth said the takeover provides the engineering firm "with a strategic partner [to] assist us in our on-going global expansion." Balfour Beatty, Chief Executive, Ian Tyler said it "represents the realisation of a number of key strategic objectives for Balfour Beatty [and] substantially strengthens our US presence and puts Balfour Beatty in an excellent position to take advantage of increased infrastructure spending."
- Confirmation of the sale is subject to approval by both company shareholders. Balfour Beatty is to raise about £353 million of the purchase price with a three-for-seven rights issue priced at 180p or about a 48% discount of the publicly traded company's London Stock Exchange closing price on Wednesday before a substantial jump in the stock on release of the news last week on Thursday 17 September.
- PB was founded in New York in 1885, and today employs about 12,650 people in more than 100 offices worldwide including the UK, Australia, Hong Kong, Singapore, India and emerging markets in the Middle East, Africa, Asia and South America. From its famous corporate headquarters at One Penn Plaza in Manhattan, the employee-owned professional services group, one of the world's largest, had revenues last year of some US$2.34 billion. This is earned from its skills, resources and operations in strategic consulting, planning, engineering, program/construction management, and operations for all modes of infrastructure, including transportation, power, community development, water and the environment. The PB employee shareholders' meeting is on 21st October and if approved, the deal will represent a healthy payout for the 4,750 employee owners.
Balfour Beatty chief Ian Tyler
- Balfour Beatty traces its origins back also 100 years and more, providing engineering and construction services throughout the British Empire of the time. Today it employees about 40,000 and had revenues last year of about $15 billion, some 30% of that coming from its operations in the United States. It is an international engineering, construction services, investment group, offering capabilities across infrastructure markets with a particular focus on the public sector and regulated utilities. It delivers services to the development, creation and care of infrastructure assets including investments, project design, financing and management, engineering and construction and maintenance management.
- Exactly how the two companies will operate as one contractually is yet to be disclosed but James Lammie, Chairman of the PB Board explained that Balfour Beatty has agreed that PB will retain its name and organizational structure and operate as an independent but wholly owned subsidiary. "We believe this will allow us to continue to meet our clients' needs in ways they expect while expanding into new areas that will provide additional opportunities for our employees."
Parsons Brinckerhoff CEO
- For Balfour Beatty, the acquisition is a major step in its plans to extend the company's overseas and project management businesses. Chief Executive Tyler said; "our infrastructure customers require us to offer a greater range of services. Buying Parsons Brinckerhoff as a market leader in the US civil infrastructure, transportation and power markets, is a transformation deal in this respect. We share the ambition of developing an organization with genuine global reach across the whole spectrum of infrastructure investment, development, and particularly the creation and care of essential assets. Bringing the two organizations together will bring real opportunities and real value. It is a key step in becoming a global integrated leader in infrastructure services. Above all, though, I'm absolutely clear that we need to maintain the brand, the values, the culture, and the processes of Parsons Brinckerhoff as a complete entity."
- Both companies are leaders in the separate fields of design and construction of underground space and tunnelling. PB worked on the design and delivery of New York's first subway and went on to contribute significantly to the BART system in San Francisco; the LA Metro; and, currently, the Delhi Metro in India; among many, many others. The project that cost the company dearly was its involvement, in joint venture with Bechtel, as the program and construction management consultants of the Big Dig project in Boston to replace elevated highways underground in cut-and-cover tunnels. The project's cost ballooned over budget, construction ran well over time and quality issues have plagued the operation and maintenance of the underground infrastructure since it opened and included the death of a car passenger when a section of concrete ceiling fell.
- Balfour Beatty has been involved on different phases of the London Underground; was part of the Anglo-French consortium that built the Channel Tunnel; worked on construction of hydro schemes in Sri Lanka and Malaysia; was a major player on the Lesotho Highlands Water Project in Southern Africa; and is currently building the Hindhead highway tunnel in south-east England. The project that cost Balfour Beatty most was the Heathrow Express railway tunnel project in London that suffered the UK's worst ever tunnel collapse. On both problem projects the companies had to pay heavy penalties and fines.