| Mon 25 Apr 2005, 10:24 | | WBHO confirms Concor merger talks |
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WBHO confirms Concor merger talks
By Dirk d Vynck
Listed construction firms Wilson Bayly Holmes-Ovcon (WBHO) and Concor were in merger talks, Mike Wylie, WBHO`s chairman, confirmed yesterday.
This follows a joint cautionary announcement on Friday afternoon in which the two groups said that they were in discussions, although no further details on the negotiations were given.
Concor shares responded positively to the cautionary, climbing 60c, or 3.19 percent, to close at R19.40. However, WBHO`s share price showed no reaction and was unchanged at R26.70.
The construction and building materials sector gained 0.05 percent on Friday.
Steve Meintjes, an investment analyst at Imara SP Reid, said a merger of the two groups would put them in a much stronger position as far as tendering for government work was concerned.
The government has budgeted about R180 billion for its infrastructure development plan over the next five years.
Charles Martin, a senior economist at the Bureau for Economic Research, said a merger would give the enlarged group more clout in the construction market and bring it into consideration for many of the larger projects that, up to now, may have only been the prerogative of the mega players, being Murray & Roberts and Aveng.
But Martin said there was also the possibility that the talks could stretch further than just a merger and that black economic empowerment (BEE) could also be part of the deal.
`In order to get government work, construction companies need a BEE component. Including a BEE partner as part of the merger would further strengthen the enlarged group`s stature.`
Bringing a BEE partner into the deal would pre-empt the finalisation of the construction sector`s draft empowerment charter, which could be ready by June or July this year. This follows the tabling of a draft BEE charter scorecard template at the construction sector transformation indaba last week.
The first draft of the charter was released for public comment in February, although it did not contain any targets.
Meintjes said a merger would further entrench the presence of Concor, which is 50 percent-owned by German firm Hochtief, in the local market as WBHO had a very good standing in South Africa. In turn, WBHO would benefit from Concor`s overseas connections.
WBHO has a market capitalisation of R1.48 billion, making it much larger than Concor, which has a market capitalisation of only R256 million.
In the six months to December, WBHO increased its revenue by 82.4 percent to R2.237 billion, while Concor`s revenue for the same period was down 2 percent to R738.6 million.
Published on the web by Business Report on April 25, 2005.
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