Carillion Middle East suitor plots takeover attempt and prized London listing

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Carillion has substantial operations in the Middle East (Source: Getty)

At least one Middle Eastern construction firm is eyeing Carillion’s update this Friday ahead of a potential takeover bid for the struggling builder.

Final touches are being put to an offer from a new suitor to buy up Carillion’s shares and give the operator access to the firm’s London listing, City A.M. understands.

The bidder plans to submit a letter of intent to take control of the firm. However, it is waiting for the extent of Carillion’s financial woes to be laid bare at the end of this week before committing to a bid.

If all goes to plan, representatives will deliver presentations on the deal to the company and advisers EY shortly afterwards.

The latest bid is unrelated to reports of ongoing talks between Carillion and a number of Middle Eastern construction firms over the sale of part of its overseas operations.

Carillion’s auditors KPMG are wading through its books ahead of a delayed half-year profits announcement on Friday.

Problems with Carillion’s contracts prompted the firm to reveal an £845m writedown in July, sending its shares into freefall. Investors have seen 75 per cent wiped off the value of their stock since the announcement. Carillion subsequently crashed out of the FTSE 250 in August.

Such writedowns relate to three-quarters of Carillion’s contracts. Concerns remain that if KPMG were to unearth similar problems in the remaining contracts, it could be terminal for the company.

Read more: BT's Openreach checks £1.5bn Carillion deal

Pensions

In addition, Carillion is also saddled with a pension deficit of £650m, more than three times its current £200m market capitalisation.

The UK’s Pensions Regulator is keeping a close eye on the financial viability of the firm. If Carillion were to fail, its retirement scheme may fall into UK lifeboat the Pension Protection Fund (PPF). It is understood the PPF is monitoring the situation from a distance, suggesting an administration is not imminent for the time being.

One source involved with the latest takeover attempt said the “value of the stock is almost irrelevant” given the scale of Carillion’s pension shortfall.

Many City analysts are reserving judgement on Carillion until Friday’s announcement. Some are pinning their hopes that the construction firm, with £5bn of annual revenues, is too big to fail and that the government depends on it to deliver a number of key infrastructure contracts.

Carillion and EY declined to comment.

Read more: Hedgies bag £80m on Carillion crash

 

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