July ends with continued action in the global construction-sector acquisition arena, as one new U.K.-based deal is announced but another falls apart.
ARCADIS N.V., Amsterdam, said on July 31 that it has agreed to buy London-based Hyder Consulting plc. for $430 million in cash.
ARCADIS ranks at No. 10 on ENR's list of the Top 150 Global Design Firms, with $3.3-billion in total 2013 revenue, including $2.9 billion internationally.
But British contractor Balfour Beatty plc has called off merger talks with Carillion, another large U.K. builder, after announcing the discussions only on July 24.
Although Arcadis and Hyder have substantially overlapping business lines, the Netherlands firm believes it can benefit from the U.K. consultant’s presence in the Middle East, U.K., Germany and Asia and also from its expertise in infrastructure, building, and water engineering and management.
With roots dating back to the mid-19th century, Hyder has a staff of about 4,500 and generates sales of around $500 million. It ranks at No. 70 on ENR's Top 150 Global Design Firms list. Over half the firm's business is in transportation infrastructure, with work in buildings, utilities and environmental sectors comprising the rest.
Geographically, the U.K., Australia and the Middle East each accounts for roughly 30% of Hyder’s sales, with other work in Asia and Germany. Arcadis CEO Neil McArthur says the combination accelerates the firm's "sustainable growth strategy," while Hyder CEO Ivor Catto says the offer “provides certainty, in cash, to our shareholders today."
Hyder became listed on the London Stock Exchange in 2002, a year after some 65 directors and staff acquired the firm from U.S.-owned WPD Ltd., Bristol, for the equivalent of $34 million. At the time, Hyder employed around 2,500 staff.
Hyder is the product of the 1987 merger of Freeman Fox & Partners and John Taylor & Partners. Renamed ACER Consulting, the firm was acquired six years later by the Wales-based privatized water and power utility Hyder plc. The utility, Hyder, was itself broken up, following its acquisition, in 2000, by WPD, a company jointly owned by PPL Corp., Allenton, Pa., and Southern Energy Inc., Atlanta. The design firm’s 2001 management buyout was part of that breakup.
Related to the other deal discussions, Balfour Beatty attributes their end to Carillion's “wholly unexpected decision” to continue negotiations only if Balfour Beatty reversed its plan—now at an advanced stage—to sell its design subsidiary, New York City-based Parsons Brinckerhoff Inc.
The proposed deal, initiated by Carillion, would have created a construction firm with global sales exceeding $20 billion and substantial business in the U.S. and Canada.
“This change is contrary to the basis upon which the Balfour Beatty board agreed to engage in preliminary discussions,” says a Balfour Beatty statement. The company will revert to its original business plan, announced in May, that includes selling Parsons Brinckerhoff and recruiting a new CEO to replace Andrew McNaughton, who resigned in May.
In a statement, Carillion’s directors said they were surprised by Balfour Beatty’s decision but continue “to believe in the powerful strategic rationale of a combination” of the two firms.
However, for the merger to proceed on terms agreeable to Carillion, the directors believe “it would be essential to retain the stability and dependability of Parsons Brinckerhoff’s earnings."
For Balfour Beatty, Carillion’s merger proposal followed a difficult period, when Balfour Beatty was forced more than once to revise downward profit forecasts for U.K. operations and shed its CEO this May.
On news of the termination, Balfour Beatty’s share value lost nearly half its almost 12% rise that came in the wake of the proposed merger announcement.