Carillion PLC (LON:CLLN) shares leapt higher today, propelled by takeover speculation after a media report suggested a Middle Eastern construction firm was preparing a bid for the struggling construction and support services company.
In mid morning trading, Carillion shares were up 17.2%, or 8.0p at 54.5p.
READ: Carillion finance director and other top executives step down in the wake of profit warning
The small cap firm – demoted from the FTSE 250 index this month – will report its interim results on Friday and City AM reported that the potential buyer would wait to analyse the numbers and the state of Carillion’s finances before tabling any bid.
Shares in Carillion have fallen by nearly 75% since mid-July when it took an £845mln writedown on construction contracts and announced the departure of its chief executive.
Carillion’s troubles have been compounded by its debt and pension obligations, as well as problems collecting cash. In July, the group’s first half average net debt was £695mln, while its pension deficit net of tax was £587mln.
Carillion has suspended its dividend and is selling non-core businesses to try and reduce its debt burden.
David Madden, market analyst at CMC Markets UK said: “The troubled construction company may welcome the takeover approach as it is struggling with high debts, but some shareholders might feel they are being targeted near the all-time low.”