NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

THIS ANNOUNCEMENT IS NOT AN ANNOUNCEMENT OF A FIRM INTENTION TO UNDERTAKE ANY TRANSACTION UNDER RULE 2.7 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE") AND THERE CAN BE NO CERTAINTY THAT ANY TRANSACTION WILL PROCEED NOR AS TO THE TERMS OF ANY TRANSACTION

FOR IMMEDIATE RELEASE

20 August 2014

Balfour Beatty plc

Rejection of Carillion's Proposal

The Board of Balfour Beatty has considered the terms of the revised merger proposal from Carillion plc ("Carillion") dated 19 August 2014 and consulted with its major shareholders.

The revised proposal again fails to address the two key concerns that Balfour Beatty has consistently raised:

1.   The considerable risks associated with the proposed business plan, including the strategy to significantly reduce the scale of the UK Construction business when it is poised to benefit from a recovery in the market; and

2.   The continued intention to terminate the sale of Parsons Brinckerhoff at a point when it is reaching a successful conclusion.

Accordingly, the Board has unanimously concluded that the proposal is not in the best interests of its shareholders and has decided to reject the proposal. Therefore the Board will not be seeking an extension to the PUSU ("Put Up or Shut Up") deadline of 5pm on 21 August 2014.

The Board also notes that the revised proposal represents only a small value change in the terms compared to the proposal from Carillion rejected on 11 August 2014. Further details are set out within the Appendix.

The Board of Balfour Beatty will therefore continue to be focused on delivering its standalone strategy as set out in the Group's interim results announcement on 11 August 2014. The key priorities are as follows:

·    Concluding the Parsons Brinckerhoff sales process at an attractive value, and consequently returning up to £200 million of capital to Balfour Beatty shareholders;

·    Recruiting an outstanding Group CEO;

·    The restoration of value from the UK construction business including progressively returning it to peer group margins;

·     Realising further indirect overhead savings and shared service efficiencies across the Group, where all of the benefits will accrue to its shareholders; and

·    Publishing the updated valuation of the PPP portfolio which takes into account current market conditions.

The Board will also remain open to strategic value creating opportunities across the Group while it concentrates on the restoration of value to its shareholders. It will consider all such opportunities, and the risks associated with their execution, taking full account of the significant recovery potential within the Balfour Beatty business.

There can be no certainty that an offer will be made by Carillion for Balfour Beatty nor as to the terms of any such offer.

This announcement is not being made with the consent of Carillion.

ENDS

Enquiries:

Balfour Beatty

Anoop Kang, Head of Investor Relations

+44 (0) 20 7216 6913

anoop.kang@balfourbeatty.com

Patrick Kerr, Director of Corporate Communications
+44 (0) 20 7963 4258

patrick.kerr@balfourbeatty.com

Goldman Sachs (Lead Financial Adviser and Corporate Broker to Balfour Beatty)

Anthony Gutman

Philip Shelley

Owain Evans

+44 (0) 20 7774 1000

BofA Merrill Lynch (Joint Financial Advisor and Corporate Broker to Balfour Beatty)

Michael Findlay

Justin Anstee

Georgina Stober

+44 (0) 20 7628 1000

Maitland

Neil Bennett

Liz Morley

James Isola

+44 (0) 20 7379 5151

Directors' Responsibility Statement

The Directors of Balfour Beatty accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Directors, who have taken all reasonable care to ensure such is the case, the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

This announcement is for information purposes only and does not constitute an offer to sell or an invitation to purchase any securities or the solicitation of an offer to buy any securities, pursuant to the offer or otherwise.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Publication on website

A copy of this announcement will be made available subject to certain restrictions relating to persons resident in restricted jurisdictions on Balfour Beatty's website at www.balfourbeatty.com by no later than 12 noon (London time) on 21 August 2014.

The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

Further information

Goldman Sachs International, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as financial adviser to Balfour Beatty and no one else in connection with the matters referred to in this announcement. In connection with such matters Goldman Sachs International, its affiliates and its and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to anyone other than Balfour Beatty for providing the protections afforded to clients of Goldman Sachs International, or for giving advice in connection with the contents of this announcement or any other matter referred to herein.

Merrill Lynch International ("BofA Merrill Lynch"), a subsidiary of Bank of America Corporation, is acting exclusively for Balfour Beatty in connection with the matters referred to in this announcement and for no one else and will not be responsible to anyone other than Balfour Beatty for providing the protections afforded to its clients or for providing advice in relation to the contents of this announcement or any other matter referred to herein.

Forward-looking statements

This announcement may include certain forward-looking statements, beliefs or opinions, including statements with respect to Balfour Beatty plc's business, financial condition and results of operations. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "anticipates", "targets", "aims", "continues", "expects", "intends", "hopes", "may", "will", "would", "could" or "should" or, in each case, their negative or other various or comparable terminology. These statements are made by the Balfour Beatty plc Directors in good faith based on the information available to them at the date of this announcement and reflect the Balfour Beatty plc Directors' beliefs and expectations.  By their nature these statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, developments in the global economy, changes in UK and US government policies, spending and procurement methodologies, and failure in Balfour Beatty's health, safety or environmental policies.

No representation or warranty is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements speak only as at the date of this announcement and Balfour Beatty plc and its advisers expressly disclaim any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in this announcement. No statement in the announcement is intended to be, or intended to be construed as, a profit forecast or profit estimate and no statement in the announcement should be interpreted to mean that earnings per Balfour Beatty plc share for the current or future financial years will necessarily match or exceed the historical earnings per Balfour Beatty plc share. As a result, you are cautioned not to place any undue reliance on such forward-looking statements.

Rounding

Certain figures included in this announcement have been subjected to rounding adjustments.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION. THIS ANNOUNCEMENT DOES NOT CONSTITUTE A TAKEOVER OFFER OR AN OFFER OF SECURITIES. NO OFFER OR SALE OF SECURITIES MAY OCCUR IN THE UNITED STATES UNLESS THE TRANSACTION HAS BEEN REGISTERED UNDER THE US SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR IS EXEMPT FROM REGISTRATION THEREUNDER. NO SECURITIES HAVE BEEN OR WILL BE REGISTERED UNDER THE SECURITIES ACT AND THERE WILL BE NO PUBLIC OFFER OF SECURITIES IN THE UNITED STATES.

APPENDIX

The revised proposal from Carillion represents an increase in value of £55m compared to the proposal rejected on 11 August 2014 on the basis set out below.

In Carillion's announcement on 19 August 2014, the pro forma market capitalisation of Balfour Beatty is calculated by reference to the new shares issued by Carillion and Carillion's closing share price as at 18 August 2014. Balfour Beatty shareholders will also receive the proposed cash dividend of £59 million. On this basis Carillion calculates a total equity value offered for Balfour Beatty of £2,086m.

Balfour Beatty notes two issues with the valuation methodology used by Carillion: first, it implicitly assumes that the market capitalisation of the pro forma combined group increases as the number of Carillion shares issued increases; secondly, Carillion's methodology does not take into account the impact of the proposed dividend payment on the pro forma market capitalisation, which would be funded 58.268% by Balfour Beatty shareholders.

An alternative methodology is set out below which takes into account these factors:

·    The combined market capitalisation for the proposed combined business is £3,162 million based on adding together the market capitalisations of Balfour Beatty and Carillion (based on closing prices as at 18 August 2014).

·    This combined market capitalisation is then reduced by the proposed dividend payment of 8.5p per Balfour Beatty share (£59 million in total), to £3,103 million.

·    Based on Carillion's revised proposal, Balfour Beatty would receive 58.268% of this combined market capitalisation. This equates to £1,808 million, equivalent to 262p per Balfour Beatty share.

·    The total value to Balfour Beatty shareholders should include the proposed dividend of 8.5p. On this basis, the total value to Balfour Beatty shareholders increases to £1,867 million, equivalent to 271p per Balfour Beatty share.

·    Using the same methodology, the total value to Balfour Beatty shareholders of the proposal rejected on 11 August 2014 is £1,812 million, equivalent to 263p per Balfour Beatty share. The revised proposal therefore represents a value uplift of £55 million.

SOURCES AND BASES

Unless otherwise stated, financial and other information concerning Balfour Beatty and Carillion has been extracted from publicly available sources or from Balfour Beatty's management sources.

The Appendix is based on the following:

·    Balfour Beatty closing share price on 18 August 2014 of 248.0p (sourced from Thomson Reuters), and 689,500,514 ordinary shares outstanding.

·    Carillion closing share price on 18 August 2014 of 337.4p (sourced from Thomson Reuters), and 430,254,629 ordinary shares outstanding.

·    The total value to Balfour Beatty shareholders of the proposal rejected on 11 August 2014 assumes that Balfour Beatty shareholders receive 56.5% of the combined group and the proposed dividend payment of £59 million.