Balfour Beatty, whose building projects include a new hall of residence at the University of Edinburgh, rejected three proposals from its smaller rival to merge the companies and create a UK-focused construction group worth more than £3 billion.
Carillion ended its pursuit yesterday afternoon, a move that now bars the company from making another offer for at least six months under Takeover Panel rules.
Balfour said in a statement yesterday that its board had unanimously rejected Carillion's latest advances after speaking to its shareholders, and it had refused to give Carillion more time to negotiate.
The board added that it will "remain open to strategic value-creating opportunities across the group while it concentrates on the restoration of value to its shareholders."
Shares in Balfour Beatty slumped 6.7 per cent to 238.9p yesterday after the companies announced the collapse of their merger talks. Carillion shares also fell - two per cent to 330p.
Balfour, which has issued four profit warnings in two years and lost its chief executive in May, plans to go ahead with the sale of Parsons Brinckerhoff, the US consulting business it has owned since 2009.
The division was at the centre of the fight between Balfour and Carillion, which wanted the merged firm to keep Parsons.
Balfour, on the other hand, said the business did not fit well and that a sale would leave it with £200 million to return to its shareholders.
Parsons has attracted a number of bids and the sale process "is reaching a successful conclusion," Balfour said yesterday.
The two firms first revealed they were in merger talks in late July. Carillion improved its terms twice, this week offering Balfour's shareholders 59.3 per cent of the enlarged company and £60m in dividend payments in a package that valued its larger rival at more than £2bn.
Analysts at Liberum Capital said both firms have prospects even without the merger, adding in a research note: "The saga has reminded the market of the value potential within Balfour Beatty: the (Parsons) disposal is progressing well, the investment portfolio is likely to be re-valued upwards and the bigger prize remains to improve construction margins from zero into a recovery."