Deal believed to be worth more than R100m

ENGINEERING and construction group Murray & Roberts announced yesterday it was negotiating the purchase of listed local mining contracting group Cementation, as well as Cementation's businesses in Australia and Canada.

The deal, which would be worth more than R100m, was due to be completed next year and would bolster the range of services Murray & Roberts offers. "In principle, this would be a complementary addition to (its) service offerings," said analyst Mark Ingham.

"Cementation will find a strong home in Murray & Roberts, and there is no doubt that (the company) has the technical, financial and management capability to integrate this business, which will slot in nicely with their mining and construction operations."

Cementation's share price climbed nearly 80%, to R7,50, when 200 shares traded yesterday.

Cementation has a market capitalisation of about R75m, and an annual turnover in excess of R1bn compared with Murray & Roberts' more than R10bn turnover and there is a further R400m in annual turnover in the Canadian and Australian Cementation businesses.

The local Cementation business is highly illiquid, and majority shareholder Skanska failed in its attempt in 2001to take out the minorities. It then boosted its stake in the business to just less than 80% by converting preference shares into ordinary shares, and is now negotiating the sale with Murray & Roberts.

"The South African, Canadian and Australian businesses are considered to be noncore, and that is why we put them up for sale," said Skanska spokesman Peter Gimbe. "We expect the deal to result in a capital loss of around 100-million krone as a result of goodwill allocated to these operations in the acquisition of Kvaerner Construction being written off."

Skanska acquired the Cementation businesses when it took over Kvaerner.

"The Cementation mining business has been at the forefront of underground mining developments for the past 80 years and will complement our capability to serve the global resources sector," said Murray & Roberts CEO Brian Bruce.

He said Murray & Roberts had been eyeing Cementation for some time, and that it intended to "pursue a strategy of greater critical mass" and a more effective global presence.

Bruce said the acquisition of Cementation's mining operations would add a new dimension to Murray & Roberts, making it one of the world's leading underground mining services companies.

The firm is seeking to acquire the 79,13% stake in Cementation SA held by Skanska, as well as the 57,44% interest in Cementation's 6% cumulative preference share capital, also held by Skanska.

Cementation announced yesterday that the transaction would result in Murray & Roberts becoming a controlling shareholder, obliging the firm "to extend an offer" to minorities on the same terms as those offered to Skanska.

Bruce said that Murray & Roberts intended to take out the minorities and delist Cementation.

The firm said that following a duediligence, the intention was for a deal to be signed in January, with closure of the deal in the first quarter next year, once regulatory approval had been obtained.