Carillions collapse delivers a boost for shares of rivals


The collapse of British construction and outsourcing giant Carillion PLC was swinging focus on shares of rival companies as ripple effects from the failure started to emerge on Monday.

One company, Balfour Beatty PLC said it will take a hit of 35 million to 45 million pounds ($48 million to $62 million) from Carillions liquidation. The notification drove Balfours shares
BBY, -2.76%
lower, losing much as 2.9% on an intraday basis.


Carillion
CLLN, +0.00%
said Monday it will enter liquidation after crisis talks failed over the weekend. The construction company had been in discussions with the U.K. government and its creditors to save itself, but a deal couldnt be worked out.


The knock-on effect on the broader economy could be large, given that the potential number of job losses are in the thousands, said City Index in a note Monday, pointing out that Carillion employs around 43,000 people worldwide, including 20,000 in the U.K.

In addition to its construction business, Carillion delivers a range of public services as one of the governments biggest contractors, and subcontracts a slice of that work out to smaller companies.

The company is carrying a large pension deficit, and in November, it put out its third profit warning in under six months after some of its contracts failed to bring in the earnings expected.


Carillion shares, listed on the London Stock Exchange, were suspended Monday, at a price of 0.142 pence each. But the potential for its rivals to pick up Carillions contracts helped lift some of those companies shares. Construction and services company Interserve PLC
IRV, +1.11%
traded 2.9% higher, outsourcer Serco Group PLC
SRP, +5.35%
bulked up 4.6%, and builder Costain Group PLC
COST, +0.53%
rose 1.6%.


Shares of Kier Group PLC
KIE, +3.23%
tacked on 0.7%. The construction company had been working with Carillion on the U.K.s HS2 high-speed rail line and the Highways England smart motorways program.


Following todays announcement and after a short period of transition for these contracts, we do not expect there to be an adverse financial impact on the Group arising from these joint venture contracts, Kier said in a statement.

Shares of Banco Santander SA
SAN, +0.10%
were fractionally lower Monday. The move followed a report by business daily Expansion that the Spanish lenders U.K. arm is one of Carillions principal creditors and that Santanders total exposure to Carillion could be between 拢50 million and 拢100 million.

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