Industrial Reporter
AVENG may come to the rescue of Australian subsidiary McConnell Dowell whose independent directors have offered the SA company the chance to take total control of the company.
If McConnell Dowell shareholders approve the proposal, SA's largest construction group would take over the remaining 37% it does not yet have for A20m and the Australian company would be delisted.
McConnell Dowell decided on the proposal after it found itself on the wrong side of a shift in global trends. Aveng CE Carl Grim said the new trend was for an entire contract to be awarded to one construction group instead of several contractors working on a large project.
In this environment, McConnell Dowell found itself exposed to significant risk if it wanted to bid for such a large project.
The Australian company admitted it faced difficulty getting the necessary insurance, bonding and bank finance to enable it to operate effectively in the changing construction environment.
With Aveng's full backing, Grim said McConnell Dowell would be better off operationally and strategically. It could negotiate lower insurance costs and would benefit from closer ties with other Aveng subsidiaries.
Grim said that if the deal was approved there would be no change to Aveng's risk profile, and a turnaround could be expected in about three years.
An analyst said the move was not unexpected, and did not see it hurting Aveng's risk profile.
Although Aveng had been looking at the option of taking full control of the company, Grim said it wanted management at McConnell Dowell to come to that decision on its own.
Grim said the only management change would be the introduction of a new chairman.
Grim refused to be drawn on speculation on whether shareholders in McConnell Dowell would approve the sale.
He said only that the price of A1,54 a share was close to market price.
Aveng's share price closed up 1,18% at 860c with 471580 shares traded in 168 deals.
Apr 09 2003 07:03:31:000AM Larry Claasen Business Day 1st Edition
Wednesday
09 April 2003
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