Skanska acquiring interest in costain and signs global cooperation agreement
Skanska has decided to become a shareholder in the major British engineering and construction firm Costain, concurrent with the signing of a global cooperation agreement on major projects. The Costain Group has annual sales of about GBP 750 million and has a reputation for technical excellence in the British and international construction markets.
SKANSKA ACQUIRING INTEREST IN COSTAIN AND SIGNS GLOBAL COOPERATION AGREEMENT
Skanska has decided to become a shareholder in the major British engineering and construction firm Costain, concurrent with the signing of a global cooperation agreement on major projects. The Costain Group has annual sales of about GBP 750 million and has a reputation for technical excellence in the British and international construction markets.
Initially, Skanska will subscribe more than seven percent of the share capital in Costain and receive options which, if exercised in full within three years, would increase its shareholding interest to 40 percent and require it to make a full bid. The first holding is being subscribed at a price of GBP 0.40 per share, while the average price in the subsequent exercise of the option will be GBP 0.45.
In addition, Skanska receives the right during a six year period to participate on a 50/50 basis in all Costain's building and civil engineering projects exceeding GBP 20 million worldwide. During the past six years the total value of such major projects in which Costain has participated is approaching GBP 4 billion. The agreement also gives Costain reciprocal rights to bid jointly on Skanska projects exceeding GBP 20 million in the United Kingdom.
Skanska's initial total investment for the shareholding, option and joint-venture agreements will be approximately GBP 10 million.
"For Skanska, this represents a further step in our internationalization and provides the opportunity of further expanding in an attractive new market within a few years," comments Claes Björk, Skanska's president.
"We are already working successfully in cooperation with Costain on ongoing British projects and I am convinced that an intensified cooperation will be profitable for all concerned," Claes Björk continues.
In recent years Skanska and Costain have had a successful project cooperation in the British market. Construction of the privately-financed Parc Prison at Bridgend in Wales, is nearing completion ahead of schedule and a hotel project in Manchester for Radisson SAS is under way. In addition, the cooperation is likely to provide valuable contacts with Costain's two principal shareholders, Intria and Kharafi, both with operations in markets attractive for Skanska. Intria is a Malaysian investment company, whose interests include privately financed infrastructure projects. Kharafi is a construction group based in Kuwait with extensive construction operations in the Middle East and in Africa.
Costain, which has been a leading name in engineering and construction for more than a century, has experienced a weakening of its financial position in recent years, due in large part to a number of unprofitable investments outside the company's core operations. The company has withdrawn from these businesses and is focusing on its core business in engineering and construction.
Including Skanska's investment, Costain is raising approximately GBP 47.5 million (net of expenses and including debt conversion by the Group's Banks).
An extraordinary shareholders' meeting of Costain on November 3, 1997, will decide whether to approve the new issue of shares proposal, which is underwritten and supported by Costain's major shareholders who hold 77 percent of the votes.
Costain Group
Costain Group is an international engineering and construction group with a reputation for technical excellence founded on more than 130 years of experience.
The group has played a key part in some of the world's largest and most challenging civil engineering and construction projects, including the Thames Barrier, the Channel Tunnel, Hong Kong's new airport and the Tsing Ma Suspension bridge in Hong Kong - the world's longest combined road and rail bridge.
In 1996, Costain Group had annual sales of about GBP 750 million, with approximately 50 per cent of this from work outside the United Kingdom.
The group is now focusing its efforts and resources on developing its mainstream and specialist engineering and construction business in areas where it has particular expertise. Its future strategy is build around a commitment to strengthening its local presences in the UK, South-East Asia, the Middle East and Southern Africa.
Costain operates through six divisions - three based in the UK and three based in its three key overseas markets. These divisions employ more than 8,000 people, approximately three quarters of whom are based overseas.
Danderyd, October 13, 1997
SKANSKA AB
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