Friday, September 18, 2009

Balfour Beatty to buy Parsons Brinckerhoff for $626 million

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In a stunning move certain to affect the rail supply industry within North America and beyond, London-based Balfour Beatty plc, Britain's biggest builder, has agreed to buy construction and infrastructure-services provider Parsons Brinckerhoff Inc., a U.S. powerhouse, for $626 million. 

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Balfour Beatty said Friday it plans a $583 million rights offer to provide the majority of funding for the acquisition. New York-based PB, which is employee-owned, had annual sales of $2.34 billion in fiscal year 2008, which ended in October.

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PB’s prominence in the U.S. likely will aid Balfour Beatty as the U.S. market for rail solutions grows, particularly in the passenger rail segment, now being bolstered by the federal stimulus package. Balfour Beatty already has considerable U.S. rail experience and exposure, observers say, and roughly 30% of its overall sales are generated within the U.S.

Balfour Beatty CEO Ian Tyler acknowledged the potential U.S. market. "We've been looking to develop over a long time the weight and depth of our U.S. business," Tyler said in an interview. "This really does create a very strong and powerful business there."

Industry observers, however, suggest to Railway Age the more significant impact may be the opportunity PB offers Balfour Beatty for entry into potentially lucrative markets in Australia, India, China, and South Africa. Tyler also acknowledges the potential of these markets, including rail but also encompassing electrical and mechanical design, airports, and other construction segments.