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Balfour tumbles after rejecting sweetened Carillion deal

Balfour tumbles after rejecting sweetened Carillion deal

Shares in Balfour Beatty (BALF) tumbled after the engineering company rejected rival Carillion's (CLLN) third merger proposal, citing concerns over risks to its business.

Carillion last night made a third offer after its previous two were rejected, which would have given Balfour Beatty shareholders 58.3% of the combined group and a cash dividend of 8.5p per share.

But the Balfour Beatty board said the deal failed to address concerns it had 'consistently raised' with Carillion. The board cited Carillion's plans to reduce the scale of Balfour Beatty's UK construction business 'when it is poised to benefit from a recovery in the market' and the fact it would pull the plug on a deal to sell US unit Parsons Brinckerhoff.

Shares in 'mid cap' stock Balfour Beatty fell 6.9% to 238.5p on the news. Carillion was down 3% at 326.6p. 

Miners dragged the FTSE 100 into negative territory, ending a five-day winning streak, as a fall in iron ore and steel prices in top metals consumer China weighed on the stocks.

The UK blue-chip index shed 21 points, or 0.3%, to 6,758. Fresnillo (FRES) traded 1.3% lower at 960.5p, Antofagasta (ANTO) dropped 0.8% to 811.5p, while Anglo American (AAL) was down 0.3% at 201.5p.

China yesterday announced new policies aimed at boosting infrastructure investment in the north east, but the measures did little to halt falls in iron ore and steel prices in the country.

Glencore (GLEN) bucked the trend, however, avoiding falls to trade at 359.1p after announcing a $1 billion (£600 million) share buy-back programme and an 8% rise in first-half profits.

Royal Mail (RMG) was the biggest riser, jumping 2.2% to 448.1p. According to reports, the government discussed selling off its remaining stake in the business in mid-March, when the shares were trading at 590p, but rejected the move for fear of antagonising the City.

Standard Chartered (STAN) rose 0.5% to £12.23 after the bank said it would pay a $300 million penalty and suspend or exit some businesses to counter the risk of money laundering. Investors reacted with relief to the move.

‘We expect this settlement to have a small impact on the revenues… but as we have witnessed with HSBC, banks are willing to forego certain revenue streams given higher conduct costs in the industry,’ said Shailesh Raikundlia, analyst at Espirito Santo Investment Bank. ‘We continue to believe in the long-term growth dynamics of its emerging market footprint.’

Around 11 points were taken off the index as eight stocks went ex-dividend. They were British American Tobacco (BATS), Carnival (CCL), Hammerson (HMSO), HSBC (HSBA), InterContinental Hotels (IHG), Mondi (MNDI), Prudential (PRU) and Rexam (REX).

On the AIM market, eg Solutions (EGS) was the biggest riser, jumping 30.6% to 73.2p after the software group agreed a new contract with an existing client expected to yield £1.2 million in revenues.

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