Wednesday, 16 May 2007 02:00

Reluctant Aveng to offload Holcim stake

Aveng to return R3,2bn to shareholders from the company's sale of its cement producer Holcim SA

Thursday, 03 May 2007 02:00

Kimberley prison 'well underway'

Construction of a R662 million prison outside Kimberley, one of seven new jails, was well underway, the construction company said on Wednesday.

Construction IndustryThe medium security facility would accommodate about 3,000 men and was due for completion in November 2008, said contractor Grinaker-LTA, part of the JSE-listed Aveng Group.

Three of the other prisons, announced in 2002, would be built in Leeuwkop, Johannesburg, Nigel on Gauteng's West Rand and Klerksdorp in the North West.

Chairman of Parliament's Portfolio Committee on Correctional Services Dennis Bloem said the seven new prisons were designed to make rehabilitation of offenders easier by housing fewer people, about 10 to 15, in sections.

At present there were communal cells designed for 30 that housed up to 119 prisoners.

"By overcrowding you are brewing more criminals than rehabilitating them. You can't manage so many people in one cell. The smaller the group, the better for the social worker, for the psychologist, for the teacher and prison officials."

According to the University of London's International Centre for Prison Studies, South Africa had 160,198 prisoners by the end of 2006, but could accommodate 115,344 prisoners - an occupancy level of 138.9 percent.

Bloem said what contributed to the overcrowding was the large number of awaiting-trial prisoners, about 50,000.

He said the committee would meet the correctional services department on May 22 to get a progress report on the new prisons.

Grinaker-LTA contracts manager Cyril Kitching said the Kimberley prison was designed around a 10m wide central thoroughfare with a control room at its centre.

Medical and education facilities, industrial workshops, a vocational training centre, multi-purpose hall, kitchen, laundry and segregation unit would be situated on either side of this avenue. Twelve accommodation blocks and three recreation centres would be situated behind these buildings, said Kitching.

The facilities would cover more than 41,574 square metres and would be reinforced concrete structures with brick walls. Roofs would be made of timber or structural steel with sheet metal covering.

Kitching said local labour would be used for the project and workers would participate in an HIV/Aids awareness programme.

 

Thursday, 26 April 2007 02:00

Holed like a Swiss cheese

We may never know why Aveng decided to abandon its 46% stake in Holcim SA. After seven months of "constructive engagement" with Swiss partner Holcim Switzerland, Aveng has decided to take R6,8bn in cash and walk away. The trigger is the contentious black economic empowerment (BEE) deal that was sprung on Aveng by the Swiss in August last year. Holcim Switzerland holds the balance of Holcim SA shares.

Construction IndustryWas there political pressure for the deal after SA's president displayed interest in the transaction? There were also mutterings that Aveng's largest shareholder, the Public Investment Corp, was "supportive". In a JSE statement, Aveng said its strategy was "to achieve operational control over or have a controlling interest in all of its major investments... the disposal at an implied enterprise value of R16,4bn represents an attractive exit opportunity."

But to wait more than 60 years (the length of Aveng's association with Holcim) to decide you would like control is a somewhat delayed reaction. In any event, the Aveng/Holcim empowerment saga brings an expected bonus for Aveng shareholders (R3bn will be returned).

Empowerment partner Afrisam will no longer be paying R6,8bn for 85% of 54%, as in the original deal. Rather, Afrisam will now have to find R13,94bn (85% of R16,4bn). And the Swiss will have to buy Aveng's shares in order to put Aveng's stake, along with its own, into a vehicle (Altur) that can be presented to debt funders for appraisal.

This would be ironic because the Swiss made it clear they were not interested in providing finance for the transaction.

With this level of debt encumbering the balance sheet and sucking up every cent to service loans, will Holcim SA be able to make the investments it needs to avoid losing market share and margin? Mark Ingham, an independent analyst, says the economics of the deal has more holes in it than a Swiss cheese.

Putting a brave face on it, Afrisam says: "Though the headline funding requirement to provide for both the Aveng buy-back and Holcim's BEE transaction has now increased, the funding structure has been simplified with Aveng's exit." A degree of vendor financing now looks like a possibility. Ingham says the deal in effect offers Aveng a 19 price:earnings ratio. He says Holcim's listed rival PPC must have been used in deriving a value - and to the benefit of Aveng, since PPC as a business is far superior to Holcim.

Aveng should return all of the R6,8bn in cash to shareholders. Ingham says it would prejudice shareholders to have more money pumped into Aveng businesses such as Grinaker-LTA and McConnell Dowell, which have delivered "underwhelming performances".

Ingham says an unintended consequence of the deal will be to expose other weaknesses in Aveng. The margins that Holcim provided were cover for mediocre performances in other divisions.

There is no obvious acquisition opportunity for Aveng. Besides which, Ingham says, it needs to sort out difficulties in businesses it already owns. "They need to convince us they know what they're doing with the money," he says.

Other analysts have praised the deal because of the price Aveng has secured and because of the empowerment credits gained for enterprise development.

But this outcome is surely second prize for Aveng. Holcim is a cash-generative business, and demand for cement will grow strongly for years. Asked why Aveng walked away, Ingham says: "It makes no sense; they were the kingmakers. They held all the cards. Maybe they didn't play hard ball enough."

Aveng CEO Carl Grim has refused to talk until the shareholder circular is finalised, which should be early next month.

 

Construction firm Grinaker LTA was excluded from the bidding process to build the King Shaka airport in Durban because it could not commit to the black-economic empowerment procurement required by Airports Company of South Africa (Acsa)

Monday, 11 December 2006 02:00

Just don't drop those bricks

Large projects are driving up share prices. But will they all be completed? The construction industry has spawned more listings this year than any other sector

Monday, 11 December 2006 02:00

Construction shares for the brave

In order to capture further potential gains in construction companies in the new year one will have to be a brave investor, according to Old Mutual's Faroz Basa.

Boom times for construction and engineering companies are just beginning, says Carl Grim, CEO of industry giant Aveng.

Tuesday, 12 September 2006 02:00

'Holcim's BEE must be sustainable'

Aveng says that it is committed to sustainable black economic empowerment for Holcim SA, in which it holds a 46% stake

Thursday, 31 August 2006 02:00

WBHO to emulate peers with BEE deal

Construction group Wilson Bayly Holmes Ovcon is set to announce a black economic empowerment deal next month, the group said this week

Friday, 31 March 2006 02:00

One big building site

SA enters decade of massive property development, but has anybody planned beyond five years?

Page 6 of 10

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